An Overview and Benefits of Industrial Equipment Leasing Market

Wheel loaders parked in a yard. Source: Shutterstock


Figure 1: Overview of Global Industrial Equipment Leasing Market.
Source: Global Research Insight

The global industrial construction equipment-leasing sector includes firms that provide a wide array of tangible goods including earthmoving and road building equipment, material handling and cranes and industrial machinery (refer Figure 1 above) – 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.

Global Industrial Equipment Leasing Market

Global Construction Equipment Market Overview
Figure 2: Global Industry Leasing Market Source: ICR Report 2017

According to the Global Equipment Leasing Association, in 2017 emerging markets leasing organizations financed USD $248 billion of a total of USD $800billion in business equipment investments[1]. The amount this industry is forecasted to generate is estimated increase by 12% in most major emerging economies such as China, Brazil and Russia over the period of 2017-24[2] (Refer Figure 2 above).

U.S. equipment rental market size from 2017 to 2021 (in billion U.S. dollars)
Figure 3: US Remains the Largest Leasing Market
Source: Bloomberg

Recent data released by Global Construction Report indicates that the percentage of capital equipment acquired through leasing in the US remains the largest at around 31% of total market share[3] (refer Figure 3 above). World Leasing Yearbook statistics indicates that leasing volume is relatively high in other markets too due to various large-scale construction projects that are underway (e.g., 23.3% in Canada, 8.7% in Japan, 15.7% for Germany, and 9.4% for the United Kingdom)[4].

China construction equipment rental market size, by, product 2014-2025 (USD Billion)
Figure 4: China’s Leasing Market Growing
Source: Bloomberg

Data released by Bank of China strongly suggests that the leasing environment in China wills become very competitive over the next two decades. For most categories of leased goods the concentration of the largest eight firms is less than 50%[5]. Earth moving, material handling and concrete and road construction equipment are the major leasing markets in China (refer Figure 4).

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 China’s leasing market, as leasing offers several financial and accounting benefits that often complement bank financing[6].

Demand By Sector

Farming & Agriculture

Agriculture equipment market pie chart
Figure 5: Percentage of Agriculture Industrial Equipment Market
Source: Global Market Insight

Farming and agriculture businesses are considered to be fairly significant, contributing almost 7% to the total leasing industry (Refer Figure 5 above). Agriculture equipment is what farmers and other agriculture based businesses rely on to grow and harvest crops, as well as raise animals that we rely on for nutrition.

While not all farmers and agricultures need every type of equipment available on the market, they can use an equipment and machinery lease to acquire the large equipment and vehicular equipment that allows them to harvest fields of crops. Farmers and agriculture businesses look to set up seasonal payments when utilizing agricultural equipment leasing. This allows farmers to match up there equipment leasing payments with their incoming cash-flow.

Construction Industry

Construction equipment rental market
Figure 6: Construction Industrial Equipment Market
Source: Global Market Insight

Construction companies are commonly one of the first industries that come to mind when people think of “equipment leasing,” especially when taking into consideration the large variety of heavy equipment options available in the market today. From bulldozers to forklifts to massive cranes, a machinery lease and heavy equipment lease is almost an essential part of any construction business (refer Figure 6 above).

At most time’s machinery lease gives businesses within the construction industry the opportunity to purchase and use equipment that would normally be well outside of the scope of their budget. Construction companies like the machinery lease process of being able to easily obtain construction equipment for an affordable price. Construction equipment leasing helps speed up the process when it comes to acquiring upgraded construction equipment. When you lease machinery, you get to have affordable monthly payments that fit your budget.

Towing Industry

Equipment leasing is another popular option in the towing industry. Towing vehicles can be considered a form of equipment to a business, as they allow them to help or relocate vehicles during accidents, for government purposes, to transport high end vehicles, and more. A tow truck lease is a great way to start or expand a business within the towing industry.

Shipping and Transportation Industry

Equipment finance in the transportation industry
Figure 7: Percentage of Transportation Industrial Equipment Market Source: Global Market Insight

Shipping and transportation is a must-have industry in our nation, as they allow us all to enjoy the benefit of ordering products online or getting custom-made products sent directly to our doorstep or office. Business owners can use equipment leasing to purchase different types of shipping vehicles that will improve the bottom line of their business and increase profits as the demands of their customers increase (refer Figure 7).

A machinery lease can help business owners that need to buy mezzanines, fork lifts, conveyors and racking equipment for their warehouses to offer faster shipping options to their customers. Equipment leasing gives the shipping and transportation industry the opportunity to expand and improve their fleet of delivery vehicles and equipment for inside their warehouse.

Benefits of Equipment Leasing

You can lease almost anything

A machinery lease can help business owners that need to buy mezzanines, fork lifts, conveyors and racking equipment for their warehouses to offer faster shipping options to their customers. Equipment leasing gives the shipping and transportation industry the opportunity to expand and improve their fleet of delivery vehicles and equipment for inside their warehouse.

Immediate access to the equipment your business needs

Rather than having to wait for adequate savings or the profit to roll in, leasing equipment means it can arrive at your door within days. You can also get a much higher standard of equipment than you might otherwise be able to afford if you purchased it outright.

Get your budget under control

Leasing is good for future budgeting, because you can make fixed monthly payments, known as a ‘flat rate’, and sometimes negotiate repayments that are fixed to your income. If you know what’s going out of your business in the future, it will help you manage your cash-flow — which can be crucial for success.

A lender for every kind of equipment

Lenders usually specialise in different forms of leasing, such as finance leasing, lease rental, contract hire and operating leases — and they’re all slightly different. It can depend on the equipment being loaned out (e.g. hard assets such as plant machinery, and soft assets like office equipment), and what you decide to do at the end of the lease agreement. For example, a finance lease means you won’t own the equipment at the end of the period, and you’ll choose to return it or continue the lease.

Leasing and repairs

Certain types of business equipment lease come with easy maintenance — that is, the finance company will pay for repairs and any spare parts for the equipment. Contract hire (a type of operating lease), often used for vehicles, is a good example of this. After all, the finance company has incentive to provide this, because you agree the equipment value at the end of the agreement. In this way, the item also holds its value better than if you bought it outright.

Free up other finance options

Particularly true for longer-term leases, it may add up and be more expensive than buying the equipment outright, so it’s important to bear this in mind. However, since the finance is secured on the asset, it’s not like a traditional business loan, so you might still be able to borrow money for another business purpose.

Easy to Upgrade

There are different options to suit different businesses. Some businesses choose to return their industrial equipment back to the supplier at the end of the lease agreement, after the equipment has served its purpose. Others may choose to purchase it outright at the end of the period, or upgrade to an updated version. On the other hand, if you want to exit the lease soon after you’ve signed, it can be difficult to get out, so make sure it’s equipment that your company will need for the duration of the lease.

Not a fixed asset

Generally, when you lease a piece of kit, you don’t own the title of the asset, and therefore it won’t go on your balance sheet. This can be both a good or bad thing, depending on your situation. It’s a positive because it can be tax efficient, but it might be a negative if you don’t have any fixed assets in the business — because this won’t help your case for future business finance.

Suitable for new, growing, or established firms

Equipment leasing is an efficient way for new-start businesses to get hold of the tools they need. You may need to be VAT registered and, if your business is a start-up, you’ll need to provide a credible personal guarantee to the lender[7]. Once you’re set up and the business is making suitable profits, you may then have the opportunity to own the asset after the lease period.


[1] Global Market Insight
[2] International Construction Report, 2017
[3] Global Construction Report, PWC 2017
[4] World Leasing Yearbook, 2017
[5] The Economist, June 2017
[6] Wiening, Eric; George Rejda; Constance Luthardt; Cheryl Ferguson (2002).
[7] Global Industrial Machinery Leasing Report, 2017