The Equipment Leasing and Finance Association (ELFA) has released its Monthly Leasing and Finance Index (MLFI-25) for August, revealing mixed signals in the equipment finance sector. The report, based on economic activity from 25 companies across the $1 trillion equipment finance industry, showed a notable decline in new business volume (NBV) but improvements in credit performance.
Key Findings from the August Report:
- New Business Volume: NBV stood at $9.2 billion, reflecting a 10% drop from August 2023. On a month-over-month basis, it was down by 17% from $11.1 billion in July 2024.
- Year-to-Date Growth: Despite the recent decline, year-to-date cumulative NBV showed a 3.5% increase compared to 2023.
Other notable metrics included:
- Receivables: Accounts over 30 days past due dropped to 2.2%, down from 2.5% in July and 2.3% in August 2023.
- Charge-offs: While charge-offs decreased to 0.4% from 0.5% in the prior month, they were slightly higher than the 0.3% recorded a year ago.
- Credit Approvals: Credit approvals remained stable at 76%, unchanged from July.
- Employment: Equipment finance company headcounts increased by 1.2% year-over-year.
Additionally, the Equipment Leasing & Finance Foundation’s Monthly Confidence Index for September climbed to 61.9, the highest level in over two years, up from 58.4 in August.
Industry Reactions and Outlook
Leigh Lytle, ELFA President and CEO, commented on the decline in new business volume, attributing it to businesses holding off on investments while waiting for further interest rate cuts. However, Lytle expressed optimism that demand for equipment would pick up after the upcoming election, supported by favorable credit conditions and eventual rate reductions.
“The Fed’s decision to begin lowering interest rates will support demand for equipment, even if some businesses wait for rates to fall further before investing,” said Lytle. “We expect acquisitions to pick up once we’re past the election and rates decrease a bit more. The recent rise in confidence from equipment finance executives shows optimism for the coming months.”
Marci Slagle, CLFP, President of BankFinancial Equipment Finance, also weighed in, noting that while there has been a slowdown in origination activity, particularly among banks, portfolio quality remains stable. She anticipates that the Federal Reserve’s recent rate cut will likely stimulate growth in the fourth quarter.
“It’s definitely a pivotal time for both independent lessors and banks as we navigate these changes,” Slagle added, suggesting that lower rates could lead to increased capital expenditure and investment.
About the MLFI-25: The MLFI-25 is the only near-real-time index that tracks the volume of commercial equipment financed in the U.S. Released monthly, it provides an important economic indicator that complements other key reports, such as the Institute for Supply Management Index and the U.S. Department of Commerce’s durable goods report. For more details on the MLFI-25, including methodology and participants, click here.
About ELFA: The Equipment Leasing and Finance Association represents the financial services and manufacturing companies in the $1 trillion U.S. equipment finance sector. ELFA’s 575 member companies provide essential financing that helps businesses acquire the equipment they need to grow and succeed.
