Equipment Leasing and Financing Flashes Mixed Signals

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 that overall new business volume for April was $7.9 billion, unchanged year-over-year from new business volume in April 2017. Volume was down 13 percent month-to-month from $9.1 billion in March. Year to date, cumulative new business volume was up 9 percent compared to 2017.

Receivables over 30 days were 2.40 percent, up from 1.70 percent the previous month and up from 1.30 percent the same period in 2017. Charge-offs were 0.30 percent, down from 0.51 percent the previous month, and down from 0.38 percent in the year-earlier period.

Credit approvals totaled 76.2 percent in April, up from 75.2 percent in March. Total headcount for equipment finance companies was up 0.7 percent year over year. During 2017, headcount was elevated due to acquisition activity at an MLFI reporting company.

Separately, the Equipment Leasing & Finance Foundation’s Monthly Confidence Index (MCI-EFI) in May is 64.6, down from the April index of 68.3.

ELFA President and CEO Ralph Petta said, “Responding members continue to show solid growth in new business volume, reflecting sound fundamentals in the U.S. economy. Effects of new tax legislation signed into law late last year—bringing lower corporate tax rates, 100% expensing of new and used equipment, and the ability to continue to deduct business interest expense—are serving to buoy business confidence and contribute to healthy capex levels.  Delinquencies spiked during the period and, should a trend in credit quality emerge, bears watching.”

Brian Holland, President and CFO, Fleet Advantage, said, “The April MLFI index and increase in year-over-year new business volume are reflective of our results and what we see across the industry. In the transportation sector, order volume for Class 8 trucks continues at a pace well above industry capacity, driven by accelerating economic growth and near-record level freight volumes. Recent tax law changes and new lease accounting standards are positively impacting equipment procurement and the lease versus buy decision. We expect to see continued robust growth in both transportation and leasing and maintain a positive outlook for 2018.”

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