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Equipment Leasing Sector, 2007

U.S. Market Overview

The U.S. equipment-leasing sector includes firms that provide a wide array of tangible goods – including automobiles, computers, consumer goods, and industrial machinery and equipment – to customers in return for a periodic rental or lease payment.

These firms work directly with clients to help them acquire equipment on a lease basis, or else they work with equipment vendors or dealers to support the marketing of equipment to their customers under lease arrangements. Equipment lessors generally structure lease contracts to meet the specialized needs of their clients and at the end of the lease use their remarketing expertise to find new users for the previously leased equipment.

According to the U.S. Equipment Leasing Association, in 2005 U.S. leasing organizations financed $248 billion of a total of $800 billion in business equipment investments. This amount equaled 1.99 percent of GDP, down from 2.51 percent in 2000. In 2005 the market penetration, or the percentage of capital equipment acquired through leasing rather than cash or credit was around 31 percent. World Leasing Yearbook statistics show that this penetration is relatively high compared to other markets (e.g., 23.3 percent in Canada, 8.7 percent in Japan, 15.7 percent for Germany, and 9.4 percent for the United Kingdom).

This comparison suggests that the leasing environment in the United States is very competitive. For most categories of leased goods the concentration of the largest eight firms is less than 50 percent. Transportation, computers and construction equipment are the major leasing markets in the United States.

The long-term demand for leasing services is likely to continue to increase, but at a relatively modest and stable rate. Foreign captive leasing institutions that offer leasing as a financing option for the purchase of their own equipment could do well in the U.S. leasing market, as leasing offers several financial and accounting benefits that often complement bank financing.

Banks entering the leasing market could also experience growth, but independent leasing companies have declined in market share in recent years. International lessors that can channel high-level experience and service toward supplying specialized, expensive, or quickly obsolete machinery could contribute to the leasing industry by providing a competitive financing source for companies, particularly small and medium enterprises, to meet their capital budgeting requirements.