By Michael DiCecco, Executive Managing Director of Asset Finance, and Dan Fluharty, President of Huntington Equipment Finance, at Huntington Commercial Bank
Key takeaways
- The overall outlook for the equipment finance industry is positive as declining rates encourage companies to seek growth opportunities.
- Technological advancements, renewable energy projects, and labor market pressures are expected to impact equipment investment decisions in 2025.
- Based on the key trends we’re seeing, companies could consider prioritizing infrastructure upgrades and seeking financing flexibility.
- Industry expertise and tailored financing are increasingly important – finding a financial partner to help guide investments could be the key to success.
Growth initiatives are expected to ramp up in 2025, fueled by declining rates and the promise of a shifting tax and regulatory environment. With capital expenditure planning on the rise, companies across industries will rely on financing to acquire the tools, technology, and infrastructure needed to stay competitive.
The outlook is positive for the equipment finance industry, but navigating the complexities of a dynamic market and uncertainty will require an informed and proactive approach. In this article, we’ll highlight the economic expectations and explore major industry trends that could impact organizations’ investment decisions in 2025.
The 2025 Economic and Regulatory Outlook
The Federal Reserve’s plan for two interest rate cuts in 2025 offers a promising sign of economic stability, though businesses should be prepared for rates to remain elevated compared to pre-pandemic norms. While the cost of borrowing will ease relative to recent years, a flat rate environment remains a possibility.
On the policy front, the potential extension of key provisions under the Tax Cuts and Jobs Act (TCJA) – such as bonus appreciation and accelerated deductions – could help spur capital expenditures. Other potential changes include further reductions to corporate tax rates for domestic production and potential shifts in energy-related tax incentives, as well as ongoing discussions around tariffs. The exact timeline or viability of these changes remains unclear, however.
These potential changes on the horizon may provide avenues to reduce upfront costs or improve overall cash flow for large-scale equipment purchases. Pent-up demand for growth opportunities is likely to increase equipment financing investment and capital projects in the coming year, which could shift market dynamics and competitiveness across industries.
What’s Driving Demand in Equipment & Software Investments?
Equipment and software (E&S) investments are expected to accelerate in technology, manufacturing equipment, renewable energy, and automation in the coming year. In the next 12 months, 42% of surveyed businesses expect the volume of their E&S acquisitions to increase, compared to just 15% that expect levels to decrease†. This considerable difference indicates stronger optimism for the coming year. While the positive outlook and a desire for growth are driving investments, practical needs to address labor concerns and technological obsolescence are also factors in these decisions.
1. Technology and Automation
Technology remains a leading investment area, with businesses focusing on E&S likely to support workforce needs, not to mention automation and generative AI adoption. An Equipment Leasing & Finance Foundation (ELFF) survey found 42% of businesses plan to integrate Gen AI into their products, processes, or services over the next two years†. This trend is likely to create a ripple effect across other industries: A rise in AI has the potential to drive demand for supporting infrastructure, such as data centers and energy-efficient systems, which could further fuel investments in other areas.
However, aging infrastructure is a growing obstacle for implementing such emerging technologies. Successful adoption often requires significant upgrades to software, hardware, and overall IT infrastructure. Those still relying on legacy systems might find themselves at a competitive disadvantage unless they prioritize modernization efforts in the near term.
What could this mean for your business?
If your organization plans to invest in emerging automation or generative AI technologies, modernizing your technology stack should be the first step. Focusing on infrastructure upgrades now can help support implementation while maintaining agility and improving operational efficiency.
2. Renewable Energy and Energy Efficiency
Renewable energy projects continue to offer compelling financial benefits. Solar power, for example, has seen a 42% cost decline over the past year, making it the most affordable energy source per-kilowatt-hour‡. Even if some tax credits are scaled back, renewable energy investments remain viable due to operational savings and long-term value.
Financing these projects can align investment with returns, particularly for organizations pursuing large-scale initiatives, which is what primarily drives decision-making here. When surveyed about their renewable finance solutions, end-users cited financial considerations such as cash flow alignment and bundled solutions as their top motivators‡ – far outpacing sustainability concerns.
Additionally, the demand for energy-efficient equipment – such as HVAC systems, LED lighting, and energy storage solutions – continues to grow as companies seek to control costs and improve operational sustainability.
What could this mean for your business?
The economics of energy-related projects will likely remain unchanged in the coming year. Leveraging tailored financial tools for these projects, such as sale-leasebacks, can help provide additional payment flexibility and minimize potential risks.
3. Labor Market Pressures
Persistent labor constraints in both high- and low-skilled roles remain a pressing issue, particularly in manufacturing, construction, and healthcare sectors. We’ve seen increased interest in E&S investments to help alleviate this pressure and expect this trend to continue. An ELFF industry report found 32% of surveyed end-users cited labor costs and/or labor scarcity as the reason for financing additional equipment or software in 2025†.
While automation and generative AI cannot fully resolve workforce gaps, they are seen as critical tools for addressing inefficiencies and optimizing operations – two areas that, when improved, can help organizations do more with less. Automation investments in areas such as robots or process optimization tools could allow businesses to scale operations and manage costs more effectively while seeking solutions for labor market pressures.
What could this mean for your business?
Our 2025 economic and labor market expectations indicate companies will likely struggle to backfill skilled jobs in certain industries as workers leave the labor force, and the pool of workers for high-demand jobs will remain limited. With that in mind, investments aimed at alleviating some of these pressures and freeing up workers could be critical for achieving growth goals.
Financing in a Growth-Oriented Market
The way businesses finance their investments is evolving. E&S investment rose to $2.3 trillion in 2023, up 5.3% from the previous year†. As that number grows, so will the number of investments that are financed.
Leasing remains the most popular method for acquiring equipment, making up 25% of purchase volume in 2023†. The flexibility of leasing – combined with the ability to bundle financing with vendor solutions – allows businesses to match payments to the cash flow generated by their investments.
Banks play an increasingly prominent part in equipment financing, accounting for 59% of total financing volume in 2023†. The majority of that came from primary banking relationships, suggesting end-users look for additional offerings from their bank, such as tailored financing tools, customized repayment terms, and expertise from an established relationship.
3 Strategic Equipment Financing Considerations
Based on what the ELFF has reported, what our teams are seeing, and Huntington Commercial Bank’s 2025 Economic & Industry Outlook, here are top considerations for organizations to maximize the opportunities presented by 2025’s favorable conditions:
- Modernize Technology Infrastructure to Stay Competitive. We’re seeing companies prioritize investments in IT systems and software, often with the goal of implementing Gen AI and automation technology. However, outdated systems remain a significant barrier to adoption. Assessing technology stacks and prioritizing critical upgrades can help eliminate those challenges. Investing in scalable infrastructure in 2025 could boost competitiveness in the future.
- Leverage Leasing for Flexibility. While leasing offers well-known benefits like cash conservation, it’s especially valuable in times of evolving technology and economic uncertainty. Companies shifting to a growth mindset can increasingly leverage leasing to align costs with revenue cycles and protect against obsolescence in 2025.
- Evaluate Financing Partners. The coming years are likely to bring unexpected opportunities and challenges, underscoring the value of a lender that can offer capital alongside industry expertise and strategic insights. Looking for a financial partner that offers flexibility in deal structures and understands your unique challenges can help set you up for success.
Expect to face a complex yet promising environment for equipment financing in 2025. Declining rates and a shifting regulatory environment present opportunities for growth, though success will require strategic planning and guarding against uncertainty.
Reach out to our Equipment Finance & Leasing team for more information about financing your capital needs in the coming year and beyond.
