The Equipment Leasing and Finance Association’s (ELFA) Monthly Leasing and Finance Index (MLFI-25), which reports economic activity from 25 companies representing a cross-section of the $1 trillion equipment finance sector, showed overall new business volume in the industry for March was $9.3 billion, down 7% year over year from new business volume in March 2023. However, volume was up 18% from $7.9 billion in February. Year-to-date cumulative new business volume was up 0.5% compared to 2023.
Receivables more than 30 days were 2.1% in March, down from 2.2% in February and up from 1.9% in the same period in 2023. Charge-offs were 0.5%, up from 0.4% the previous month and up from 0.3% in the year-earlier period.
Credit approvals totaled 77%, up from 76% in February. Total headcount for equipment finance companies was up 1.5% year-over-year.
Separately, the Equipment Leasing & Finance Foundation’s Monthly Confidence Index (MCI-EFI) in April is 52.9, a decrease from the March index of 55.2.
“Some pullback in new business volume in March largely reflects the effect of banks tightening their lending,” Leigh Lytle, president and CEO of the ELFA, said. “Instead of a customary end-of-quarter spike, banks saw originations fall more than 20% in March, while other respondents enjoyed a stronger month. Credit quality is mixed, with receivables continuing to improve while charge-offs ticked back up. Interestingly, results of an informal poll of MLFI-25 respondents indicate some customers are limiting their equipment acquisitions until interest rates come down, which supports our Foundation’s forecast that equipment and software investment should pick up in the latter part of the year when the Fed is expected to begin its rate cuts. Along with the improved GDP growth forecast, we remain cautiously optimistic for continued growth for our industry.”
“The equipment leasing and finance industry has historically been an excellent predictor of economic times. There was much confidence as we entered this year that originations and portfolio performance would continue to improve as witnessed by the strength of the U.S. economy,” Miles Herman, CEO of LEAF Commercial Capital, said. “However, the punch bowl may have been taken away with March’s inflation report. We are seeing industry benchmark rates returning to November levels. As a result, the thought of a Fed rate cut may be delayed. We already saw a dip in small business optimism and persistent higher levels of inflation may further dampen it. Middle market businesses had seemed more optimistic in Q1 to spend, but CFOs may hit the pause button as well. All this suggests rougher waters to navigate over the next few months on both sides—front end originations and back-end portfolio management.”
