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6 FEBRUARY 2015 OUTDOOR POWER EQUIPMENT www.outdoorpowerequipment.com EPG Media/Specialty Information Media 3300 Fernbrook Lane N, Suite 200 Plymouth, MN 55447 OPE Staff Group Publisher David Voll Associate Publisher John Kmitta Editor Steve Noe Art Director Brian Snook Senior Production Manager Karen Kalinyak DirEct Mail liSt SalES MeritDirect, Jim Scova, (914) 368-1012; e-mail jscova@MeritDirect.com rEPrint SErvicE Joanne Juda, Sr. VP Market Development (630) 399-9864; email jjuda@specialtyim.com EDitOrial aDviSOry BOarD Former Executive Director, EETC (retired) Jim Roche Senior Advisor, Servantage Dixie Sales Jim Starmer Pres., Plano Power Equipment and Whipper Clipper Glen Whitt Director of Sales and Marketing, Central Power Distributors, Inc. John D. Hedges circulatiOn For subscription inquiries and customer service questions, please call (847) 763-9565 or fax (847) 763-9569 business hours: 9 a.m.-5 p.m. EST Publisher's Notice: We assume no responsibility for the validity of advertising claims in connection with items appearing in Outdoor Power Equipment. Commercial product names are used for the convenience of the reader. Mention of a commer- cial product does not imply endorsement by Outdoor Power Equipment or Specialty Information Media, or preference over similar products not mentioned. EDitOrial OfficES EPG Media/Specialty Information Media 3300 Fernbrook Lane N, Suite 200 Plymouth, MN 55447 accOunt rEPrESEntativES: EaSt Chris Pelikan Senior Account Manager Phone: (954) 964-8676 cpelikan@epgmediallc.com MiDWESt Peggy Tupper Senior Account Manager Phone: (763) 383-4429 ptupper@epgmediallc.com WESt Leslie Palmer Senior Account Manager Phone: (248) 731-7596 lpalmer@specialtyim.com I would like to take this opportunity to thank all 23 industry leaders who participated in our annual two- part "2015 Industry Forecasts" series, which started in the January issue and concluded in this issue (see pages 14-21). I greatly appreciate them taking time out of their busy schedules to shed light on the state of our great industry. In addition to the trends they noted, I thought you might be interested in the following "Top 10 Equipment Acquisition Trends of 2015," which were recently released by the Equipment Leasing and Finance Association (ELFA). 1. Investment in equipment and software will reach an all-time high in 2015. As the U.S. economy continues to improve, business investment is forecast to reach a record $1.484 trillion in 2015. As business investment grows, demand for equipment financing will increase. 2. Businesses will invest in equipment not just to replace aging assets, but also to aid in expansion. The pent-up replacement demand that has driven equipment investment in previous years may be supplemented by long-awaited expansion investment as capacity utiliza- tion rates in some industries reach or surpass levels historically known to spur business investment. 3. While some equipment types will see strong growth, others will moderate. In 2014, equipment and software investment increased 9.6 percent in Q2 and 9.3 percent in Q3. Looking ahead, growth in equipment and software investment is expected to moderate somewhat, as it is unlikely to keep up the strong pace seen in Q2 and Q3. A still healthy growth rate of 6 percent is forecast for 2015. 4. Improving market conditions will continue to increase credit supply and demand for equip- ment acquisitions. As the economy steadily improves and business confidence continues to increase, credit standards should modestly loosen. The propensity to finance decreased in the wake of the financial crisis as businesses deleveraged and refrained from new business investment. Since bottoming out in 2010, the rate at which businesses finance their capital spending has grown consistently and will continue to increase in 2015 with steady economic recovery and shifts in Federal Reserve policy. 5. Eyes will be on short-term interest rate increases. Expectations for the Federal Reserve to raise short-term interest rates in 2015 should spur equipment investment as businesses seek to lock in equipment financing at lower rates. Despite rate increases, businesses will find that a highly competitive "buyer's market" will continue to make financing an attractive option for acquiring equipment. 6. Businesses will use financing for a majority of their plant, equipment and software expenditures. In 2015, 62 percent or $922 billion of investment in plant, equipment and software in the United States is expected to be financed through loans, leases and lines of credit. A majority of businesses — seven out of 10 — will use at least one form of financing to acquire equipment. 7. Advances in the use of technology will drive innovative financing options. Equipment finance providers are streamlining their business processes and improving customer self-service capabilities using dig- ital technologies. At the same time, some end users are moving away from traditional equipment consumption models and toward hosted or managed services based on usage rather than total ownership. To meet customer demand and address evolving technology equipment requirements, equipment finance companies will tailor innovative financial offerings. 8. Several "wild cards" could impact equipment acquisition decisions. In what could be a breakout year for the U.S. economy, positive and negative exter- nal risks could affect equipment investment. Potential political gridlock, global economic weakness and geo- political risks could be a drag on investment decisions, but GDP growth from low oil prices, a potential surge in the housing sector and sufficient capacity utilization could have firms ramping up capital expenditures. 9. Non-traditional financing will continue to grow and play a larger role in the equipment finance industry. As regulatory scrutiny increases and some banks' lending standards tighten for certain credits, non-traditional financing sources, such as investment bankers, venture capitalists, insurance companies, crowd funders and others, are exploring opportunities in the equipment finance sector. 10. A final lease accounting standard will be released. The Financial Accounting Standards Board and the International Accounting Standards Board con- tinue to work on the lease accounting project, which will change how leases are accounted for on corporate balance sheets. A final standard is anticipated in 2015, with a possible effective date of 2018 or later. The good news is that the benefits of leasing equipment will remain intact despite the lease accounting proposal. For a video and infographic highlighting these trends, go to http://equipmentfinanceadvantage.org/ rsrcs/articles/10trends.cfm. Trending in 2015 upfront Editor Steve noe | snoe@specialtyim.com OPE