The equipment leasing and finance industry faced a mixed bag of results in March, with new business volume down year-over-year but up from the previous month, according to the latest ELFA Monthly Leasing and Finance Index (MLFI-25). The industry's overall new business volume for March was $9.3 billion, a 7% decrease compared to March 2023, but an 18% increase from February 2022.
Key Findings
Year-to-date, cumulative new business volume was up 0.5% compared to 2023.
Receivables over 30 days were 2.1%, down from 2.2% the previous month but up from 1.9% in the same period in 2023.
Charge-offs were 0.5%, up from 0.4% the previous month and 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.
Industry Insights
ELFA President and CEO Leigh Lytle attributed the pullback in new business volume to banks tightening their lending, with originations falling more than 20% in March. However, other respondents enjoyed a stronger month. Credit quality showed mixed results, with receivables continuing to improve while charge-offs ticked back up.
Miles Herman, Chief Executive Officer of LEAF Commercial Capital, Inc., noted that the equipment leasing and finance industry has historically been an excellent predictor of economic times. He expressed concern about the potential impact of higher inflation and delayed Fed rate cuts on small business optimism and middle market business spending.
Analysis
The equipment leasing and finance industry's performance in March reflects the ongoing economic uncertainty and shifting market conditions. While the year-to-date cumulative new business volume remains positive, the decline in March's new business volume compared to the previous year suggests that businesses may be cautious about equipment acquisitions due to rising interest rates and economic concerns.
The mixed credit quality results, with improving receivables but increasing charge-offs, highlight the need for industry players to closely monitor portfolio performance and adapt their risk management strategies accordingly.
The industry's confidence index, which decreased from March to April, further underscores the cautious optimism among equipment finance companies.
As the industry navigates these changing economic tides, it will be crucial for companies to stay agile, closely monitor market trends, and make data-driven decisions to maintain growth and profitability.