ELFA’s leasing activity index for August sees decline from July

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 $900 billion equipment finance sector, showed their overall new business volume for August was $8.8 billion, up 4 percent year-over-year from new business volume in August 2021. However, volume was down 13 percent from $10.1 billion in July.

Year-to-date, cumulative new business volume was up 5 percent compared to 2021. Receivables over 30 days were 1.5 percent, down from 1.6 percent the previous month and down from 1.8 percent in the same period in 2021. Charge-offs were 0.17 percent, down from 0.18 percent the previous month and down from 0.23 percent in the year-earlier period.

Credit approvals totaled 75.2 percent, down from 78 percent in July. Total headcount for equipment finance companies was down 2.9 percent year-over-year.

Separately, the Equipment Leasing & Finance Foundation’s Monthly Confidence Index (MCI-EFI) in September is 48.7, a decrease from 50 in August.

ELFA President and CEO Ralph Petta said, “August origination volume reflects an equipment finance industry that is fueling continued growth and expansion of businesses throughout the U.S. Up to this point at least, steadily rising interest rates do not appear to dampen enthusiasm of businesses that prefer the utilization of productive assets versus their ownership, which is the essence of the equipment finance sector. With the Fed’s most recent 75-basis point jump in short-term interest rates, and the prospect of a hard landing, time will tell whether—and to what extent—these same business owners continue to grow and invest in equipment.”

Thomas Sbordone, Managing Director and National Sales Manager, BMO Harris Equipment Finance, said, “While the economic data may be construed in any number of ways and can feel, at times, unsettling, the fundamentals of our equipment finance business remain strong. Companies invest in capital equipment, throughout all cycles, for a myriad of reasons and equipment obsolescence is certainly real. Productivity gains require capital and business owners are always seeking an edge on the competition. Once decision-makers get past the initial ‘sticker shock’ of seeing how their financing rates have climbed over the past year they make rational choices based on their individual circumstances. The August MLFI results look positive, generally, given the market environment with continued high inflation, supply chain issues and other challenges. It will be interesting to see the September end-of-quarter MLFI results when the effects of the Fed’s latest interest rate hike are clearer. A ‘wait and see’ approach never feels great, but we’re reminded that patience is a virtue.”

The MLFI-25 is the only near-real-time index that reflects capex, or the volume of commercial equipment financed in the U.S. The MLFI-25 is released globally at 8 a.m. Eastern time from Washington, D.C., each month on the day before the U.S. Department of Commerce releases the durable gods report.