Industry trends suggest tax opportunities and favorable credit conditions might benefit U.S. farmers looking to purchase equipment this year. That’s according to the Equipment Leasing and Finance Association, which has drawn on industry-wide data in sectors such as agriculture, construction, medicine and transportation to build a list of 10 acquisition trends for 2013.
Overall, data indicate investment in agricultural equipment likely will contract during the first quarter of this year, according to a report from the Equipment Leasing and Finance Foundation titled "2013 Equipment Leasing & Finance U.S. Economic Outlook". Overall, agricultural equipment manufacturers have expressed optimism about future consumer demand in the aftermath of the nationwide drought thanks in part to strong cash receipts.
Chart courtesy of Equipment Leasing & Finance Foundation
Sources for the Equipment Leasing and Finance Association’s list include the 2013 finance outlook, industry experts and input from association members at meetings and conferences. With that focus, here are the top 10 acquisition trends this year:
- Corporate perceptions of the economic outlook will be a primary driver of business investment decisions.
- Equipment investment will pick up in the second half of 2013.
- Pent-up demand will spur investment across varied equipment types. In his blog "Your Precious Land," for example, Mike Walsten of Pro Farmer quotes a real estate expert who says farmers continue to invest in equipment along with land.
- A continuing low interest rate environment will enable companies to acquire the equipment they need and conserve cash. That’s true for people agriculture, experts recently told Top Producer. Interest rates are anticipated to remain at their lowest level in the last half-century through at least this year, so producers should identify ways to lock in fixed rates before that changes.
- A majority of U.S. businesses will use some form of financing for equipment acquisition. While leasing might not be as popular an option for agricultural equipment this year thanks to the extension of Section 179 and bonus depreciation incentives, it remains an option from a variety of manufacturers. Consider opportunity costs when deciding whether a lease makes sense.
Watch Equipment Leasing and Finance Association President William Sutton discuss the top equipment acquisition trends for 2013:
- Business size will impact equipment acquisition.
- The gaining prominence of cloud computing will transform the way businesses pay for IT investments. It’s true for farming: Offsite information storage is making it more cost-effective for operators to access and share software.
- Credit market conditions will remain favorable for long-term equipment financing. Some institutions offer farmers special financing programs that can be used to fund inputs and consolidate debt, among other actions.
- The one-year extension of bonus depreciation may provide incentives for businesses to acquire equipment. Farmers who put new assets such as equipment and machine sheds into use between Jan. 1, 2012 and Dec. 31, 2013 can take advantage of a 50% deduction known as bonus depreciation. There is no investment limit or taxable income limit for that deduction.
- Although the value of lease financing will remain, businesses will begin to adapt their equipment acquisition strategies to comply with long-awaited changes to lease accounting standards.