Equipment Finance on Uptick with New Tax Structure

2018 tax reform has inspired more and more companies to announce hikes in employee pay, employee bonuses, enhanced benefits, increased charitable contributions and more. The tax reform also raised optimism that businesses will use their significant tax savings to expand operations to maximize opportunities in a thriving U.S. economy. The consensus is that such strong business optimism, stable credit conditions and global demand will continue to drive enough economic growth and overcome potential headwinds, primarily rising interest rates.


Here are just a few examples of how major companies’ plans may boost the equipment finance market:


  • Apple expects to invest over $30 billion in capital expenditures in the U.S. over the next five years, including building a new campus for thousands of employees
  • Amazon’s second headquarters could bring up to 50,000 high-paying jobs and $5 billion in investment to the selected location
  • AT&T has promised to invest $1 billion in the U.S. in 2018
  • Boeing has pledged to invest in capital, new product lines and manufacturing
  • Carmax intends to keep opening new stores, in part because the new tax rules allow it to immediately deduct expenses related to purchasing or leasing new locations, and erecting new buildings
  • Comcast expects to spend over $50 billion on its infrastructure over the next five years


The Equipment Leasing and Finance Association (ELFA), the trade association that represents companies in the $1 trillion equipment finance sector, agrees with the rosy outlook. The ELFA Foundation’s Monthly Confidence Index (MCI-EFI) in December was 69.4, up from 67.0 in November. Moreover, its 2018 Equipment Leasing and U.S. Economic Outlook projects that investment in equipment and software will expand 9.1 percent this year, well above the estimated 5.2 percent growth rate in 2017. If this strong growth materializes, it provides opportunities for banks that finance equipment purchases and leases, spurring them expand their loan product portfolio to include leases, loans and hybrids. 


2018 ELFA US Economic Outlook

Source:  2018 Equipment Leasing & Finance U.S. Economic Outlook 

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