Equipment Leasing Industry Confidence Increases Again in December

According to the Equipment Leasing & Finance Foundation’s December index, confidence in the equipment finance market reached 69.4 in December, an increase from 67.0 in November and the highest level in nine months.

When asked about the outlook for the future, survey respondent Frank Campagna, group vice president and line of business manager for M&T Bank Commercial Equipment Finance, said, “A number of factors enter into our optimism regarding an improved business environment, however, the anticipated removal of uncertainty regarding accounting rule and tax code changes are key events. Aligned with this optimism is our expansion into new business silos to take advantage of a resurgence of business in key sectors of our large ticket model. Our ability to drive higher returns through niche markets has encouraged the bank to increase its investment in our business providing a strong commitment to growth.”

There was little change in the number of executives who believe business conditions will improve over the next four months, with 32.1% indicating as such compared to 32.4% in November. The rest of the respondents (67.9%) believe business conditions will remain the same.

“Getting resolution to federal tax reform is encouraging. Lower taxes on pass-through and corporations should boost confidence,” said David T. Schaefer, CEO of Mintaka Financial.

Nearly half (46.4%) of survey respondents believe demand for leases and loans to fund capital expenditures will increase over the next four months, an increase from 35.3% in November. Meanwhile, 53.6% believe demand will remain the same during the same four-month time period, down from 64.7% the previous month.

“The combination of consumer spending, low interest rates and the tax cut for businesses —— assuming it gets enacted —— will create capex in the business sector. The political climate is still the wildcard that is going to make decision makers pause,” said Paul Menzel, president and CEO of Financial Pacific Leasing.

A quarter (25.0%) of the respondents expect more access to capital to fund equipment acquisitions over the next four months, down from 29.4% in November. The majority (67.9%) of executives indicated they expect the same access to capital to fund business, relatively unchanged from 67.7% last month, while 7.1% expect less access to capital, up from none last month.

When asked, 53.6% of the executives reported they expect to hire more employees over the next four months, an increase from 35.5% in November. At the same time, 46.4% expect no change in headcount over the next four months, a decrease from 61.8% last month. None expect to hire fewer employees, a decrease from 2.9% in November.

Only 10.7% of the leadership evaluated the current U.S. economy as excellent, down from 17.7% last month. An overwhelming majority (89.3%) of the leadership evaluated the current U.S. economy as fair, an increase from 82.4% in November.

Looking forward, 42.9% of the survey respondents believe that U.S. economic conditions will get better over the next six months, an increase from 32.5% in November. The rest (57.1%) of survey respondents indicated the U.S. economy will stay the same over the next six months, a decrease from 64.7% the previous month.

In December, 57.1% of respondents indicated their company will increase spending on business development activities during the next six months, an increase from 52.9% in November. Meanwhile, 42.9% believe there will be no change in business development spending, a decrease from 47.1% the previous month.

“The House and Senate have both passed tax packages which reduce the corporate tax rate and accelerate the depreciation of equipment. Both of these initiatives should provide a stimulus to the demand for equipment leasing and finance. If a final tax package similar to those passed by both house of congress are enacted, 2018 could be a breakout year for the equipment finance industry,” said Thomas Jaschik, president of BB&T Equipment Finance.

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