The equipment industry increased new business volume by 6.3% in 2022, according to the 2023 Survey of Equipment Finance Activity (SEFA) from the Equipment Leasing and Finance Association. This result is a modest decrease from the industry’s growth of 7.4% in 2021.
“We are pleased to share the results of the 2023 Survey of Equipment Finance Activity. This comprehensive source of industry data is made possible by ELFA member companies who responded to the survey, and we thank them for their participation,” Bill Choi, vice president of research and industry services at the ELFA, said. “I encourage all members to review the data and put it to work for your business. If you have any questions about benchmarking your company, using our interactive dashboard or other SEFA tools, please feel free to contact me.”
Survey Highlights
- New business volume at equipment finance companies continued to be strong after rebounding in 2021 from the COVID-19 pandemic. Among survey respondents, 75% experienced an increase in volume in 2022.
- There was an increase of 211 basis points (bps) in cost of funds between 2021 and 2022 as a result of Federal Reserve interest rate hikes. Managing this cost of funds increase will be a major emphasis as equipment finance companies make their way through the current higher-interest-rate climate.
- By organization type, banks experienced a 7.4% increase in new business volume, captives remained flat and independents, representing a much smaller group, experienced a 29.4% increase in 2022. By market segment, new business volume rose a modest 0.2% in the large-ticket segment, while it increased 7.3% year over year in both the middle- and small-ticket segments.
- From an asset perspective, the top five most-financed equipment types in 2022 were transportation, agriculture, construction, IT and related technology services, and industrial/manufacturing. The top five end-user industries, representing the largest share of new business volume, were services, agriculture, industrial and manufacturing, transportation and construction.
- Use of electronic documents continued to grow, with 88% of respondents reporting that at least some of their new business volume is documented via an electronic document. This number has risen steadily over the past five years and is up from 50% of respondents in 2018.
- Delinquencies increased to 2.3% overall in 2022 from 1.1% in 2021, with mining and oil and gas extraction and transportation-railroad continuing to experience the highest delinquency rates.
- Charge-offs decreased slightly to 0.22% of average receivables in 2022 due to a stronger recovery rate that was much higher than the previous years’ amounts.
- Credit approvals increased year over year in 2022, while the percentage of approved applications booked declined slightly. The number of applications decreased, but the dollar volume increased, an indication of the inflation the overall economy is experiencing.
- Employment increased by 3.8% overall. Independents, captives and banks increased their headcount by 8.5%, 4% and 2.5%, respectively, year over year.
- Work location arrangements reveal hybrid models show no signs of abating. More than 90% said they spend some of their time working remotely, and 36% reported spending fewer than five days a month working in a company office location. By comparison, before the pandemic, 84% of the respondents’ workforces went to the office full-time.
In addition to the 2023 SEFA, the ELFA released the 2023 Small-Ticket SEFA, which focuses on small-ticket and micro-ticket equipment transactions among the SEFA respondents. The report found that new business volume in the small-ticket space increased by 7.5% in 2022.
Members of the ELFA’s research committee, who provide support and direction in the development of the SEFA and the interpretation, analysis and presentation of the results, included:
- Mark Walters, Director of Finance, DLL (Committee Chair)
- Jeffrey Bell, Vice President, Key Equipment Finance
- John Clifford, Strategic Planning and Business Intelligence Manager, Toyota Industries Commercial Finance
- Sabah Khan, Global Risk, CNH Industrial Capital
- Stephen Morrissey, Finance Director – U.S. and Canada, John Deere Financial
- Jessica O’Brien, Vice President, Citizens Asset Finance, a Division of Citizens Bank
- Kevin Prykull, CLFP, Adjunct Professor in Finance, Duquesne University
- Kevin Sensenbrenner, Senior Vice President, Senior Managing Director and Head of Asset Management, Stonebriar Commercial Finance
- Shelly Tauer, Equipment Finance Systems Product Group Manager, U.S. Bank
- Joseph Turner, Vice President of Strategy and Analytics, First Citizens Bank Equipment Finance
