The Equipment Leasing and Finance Association (ELFA) Equipment Management Conference was a fantastic event in beautiful Tucson, Arizona, last week. It was well-attended with speakers providing excellent insights on all aspects of equipment leasing and the many challenges we face today.
The first topic covered the top 10 equipment acquisition trends. We all are experiencing the effects of rapid economic growth and continue to see equipment shortages. Because demand is so high, upward pricing pressures are making the fixed cost of assets a barrier to new entrants, and this is increasing capital spending.
Politics continue to put pressure on the market. Even as the effects of the COVID-19 pandemic are appearing to wane, the noticeable impact on supply chains and production remains. Labor shortages continue across industries. Due to technological advancements with new equipment, data-driven decisions are working their way into all aspects of business. With swelling prices comes the necessity of efficiency.
There was a session on “What’s Hot and What’s Not” in equipment. Construction and transportation are hot—oil, gas, and printing, not so much. Also lacking warmth is the overall economy, as surging costs and interest rates from inflation significantly outpace the median household income.
The Federal Reserve is taking measures to “cool down” the economy by raising short-term interest rates and reducing the amount of bonds that the Fed is buying. It’s about time. The average price increase from January 2021 to January 2022 of a used small car for an urban buyer is about 40.5%.
Autos and EVs got lots of attention. The cost entry for these vehicles is still steep, and most companies rely on government grants to help write down the upfront asset cost. We are inching toward closing the gap between the cost of traditional powered assets and EVs and justifying the investment. However, the top source of power generation is natural gas, followed closely by coal.
Probably the greatest topic of the event was the lack of used equipment inventory in all categories. With the continued challenges in new equipment deliveries, used inventories will remain in high demand, pushing prices even higher.
Is the end in sight? At this point, nobody knows. The consensus from the conference is that these issues likely will last for at least the next two years.
Patrick Gaskins, SVP of Corcentric Fleet Solutions, oversees both sales and operations for the company's fleet offerings. Gaskins joined the company in 2010, bringing more than 30 years of experience as a financial services professional in the transportation industry. He leads a team that works with a supply base of more than 160 manufacturers to help the country’s largest fleets manage all aspects of their fleet operations and fleet-related spend.