The use of lease financing will reach $10 billion in terms of annual volume this year, representing a 55 percent penetration rate of equipment acquisitions, according to new study by the Equipment Leasing Association, the non-profit association representing companies involved in the $218 billion equipment leasing and finance industry, and R.S. Carmichael & Co., Inc., a marketing research and management consulting firm, White Plains, New York. The report, Construction and Agricultural Equipment Leasing, 2004: U.S. Market Dynamics and Outlook, says in 2005 the annual volume of agricultural equipment lease financing is forecast to increase to $10.5 billion.

Other highlights from the report include:

  • The agricultural business in the U.S. has been undergoing consolidation at all levels, from the number of farm operators to the number of equipment vendors.
  • The principal agricultural equipment categories for lease financing include tractors, harvesting equipment, irrigation systems and treatment/application equipment.
  • Ticket sizes for lease financing of agricultural equipment range widely from $25,000 to more than $250,000 with the vast majority of agricultural equipment being small ticket (under $250,000).
  • Average lease terms are three years with some leases being written for as long as seven years.

Richard S. Carmichael, Managing Director of R.S. Carmichael & Co., Inc., which conducted the study, observes, “Lease financing is ingrained in the agricultural equipment industry as evidenced by major manufacturers either having captive finance companies or formal leasing relationships with third-party commercial finance companies. They find lease financing a vital sales-aid tool.”

“Lease payments are not always on a monthly basis in the agricultural market,” added Michael Fleming, the association’s president. “Farmers may make payments on a quarterly or semi-annual or even annual basis. Leasing’s flexible nature, fast turnaround, strong customer service, competitive rates are clearly key to the agricultural market.”

Among the market studies’ key objectives, the report measures and characterizes the U.S. construction and agricultural equipment leasing market; identifies the trends affecting lease financing penetration in each market; evaluates the leasing practices and needs of customers and equipment vendors; and projects the U.S. construction and agricultural equipment leasing markets through 2005.

For more information on the leasing industry, visit ELA online at www.ELAOnline.com or check out ELA’s informational portal for financial decision-makers, which includes the questions to ask before signing a lease and to access a directory of leasing companies, at www.ChooseLeasing.org.