Equipment Outlook 2018

Construction Equipment Repeats as the Winner, Containers/Chassis Breaks into the Top 5

What are the hottest equipment sectors in 2018? The answer is construction, machine tools, trucks/trailers, IT, containers/chassis and medical equipment, according to a new survey of ELFA member asset managers and consultants.

The 2018 “What’s Hot/What’s Not” Equipment Leasing Trends Report reveals industry perceptions of 15 equipment markets based on a survey of ELFA members. The following are the top equipment types from the survey:

Construction equipment was the big winner for the fifth year in a row. The equipment finance industry seems to be very comfortable with this segment, due to its rather standard equipment designs, broad demand in domestic and global markets and its vast and transparent secondary market. The outlook for construction remains solid, pinned to the continued improving health of the economy propelled by relatively low interest rates. The infrastructure bill, if passed, would be a huge plus to this already hot segment.

Machine tools tied for second place due to the strong domestic automotive and allied industries, along with the now improving oil exploration sector. In the primary market, sales for metal cutting equipment rose by 8% in 2017. This positive trend is expected to continue through 2018, aided by the new tax law and strong consumer sentiment.

Trucks/trailers tied for second place. New class 8 truck sales fell by 0.2% last year, and the driver shortage is limiting demand. New trailer shipments increased to over 300,000 for the year, the third highest ever. Sales of used trucks and trailers remain good—this sector has greatly benefited from low fuel prices and interest rates.

Hi-tech/computers tied for fourth place. This industry continues to operate on very low margins but has a vast secondary market. After 12 consecutive quarters of declining unit sales, PC shipments are forecast to continue to fall in 2018. In contrast, server shipments grew 1% in 2017, with growth forecast to continue into 2018. Declining primary market PC sales reflect a growing preference for phablets and wearables, which could have positive implications for the secondary market.

Containers/chassis tied for fourth place. Over the past year, due to strengthening global trade, primary market sales for ISO containers increased sharply by about 55%. This demand also caused an increase in new container prices of around 25%. Used container prices increased somewhat and remain relatively high by historical standards. For 2018, global trade is expected to increase again, which bodes well for the continued strength of this market.

Medical equipment tied for fourth place, down from second last year. This decline in rank is likely linked to confusion regarding the future of healthcare finance and the Affordable Care Act, and its effect on hospitals and clinics. This industry has a preference for leased equipment, which continues unabated, driven by demographics linked to the increasing health care needs of the “baby-boom” generation. However, various Deductible Reimbursement Account (DRA) cuts, rules, etc., aimed at the industry are weakening the equipment markets. The medical equipment secondary market is robust.

View the results for all 15 equipment categories on the ELFA website at www.elfaonline.org/data/market-trends.