US lessors’ new business volume up 6%

Latest data from the Equipment Leasing and Finance Association (ELFA) suggests the outlook for the sector remains good, with new business levels increasing throughout the year and continuing optimism about long term prospects.

The association’s Monthly Leasing and Finance Index (MLFI-25), which reports economic activity from a cross section of companies, shows their overall new business volume for August was $6.9 billion, down 7% from the previous year, and 18% below July’s total of $8.4 billion. However, the long term trend is positive – year to date, cumulative new business volume was up 6% compared to 2014.

ELFA president and CEO William Sutton (pictured above) said: “As the summer winds down, the equipment finance sector appears to be performing well. Despite the slight decline in August’s year-over-year volume, new business activity is up on a cumulative year-to-date basis.”

“Loans and leases in respondents’ portfolios are performing well, with credit losses remaining in very acceptable ranges. Most economic indicators continue to trend positively, contributing to our belief that these factors will help foster a favorable climate for continued investment by American businesses in capital equipment,” Sutton forecast.

Jeff Rudin, CEO of Quail Financial Solutions, said: “The MLFI results continue to indicate strength overall, albeit with inconsistent new volume. Charge-offs and delinquency metrics remain very healthy with slight improvement in approval ratios, possibly indicating a slight easing of credit. Overall industry health remains.”

Demand strengthening

Separately, ELFA’ Monthly Confidence Index (MCI-EFI) for September is 61.1, easing from the previous month’s sharp rise of 67.4. Respondents indicated they expect it to be “business as usual” for the rest of the year, with 70.4% maintaining business conditions will remain the same over the next four months, an increase from 63.6% in August.

Most (59.3%) believe demand for leases and loans to fund capital expenditures will “remain the same” during the same four-month time period, unchanged from the previous month, while a third (29.6%) think it will increase and 11% believe demand will decline, an increase from none who believed so in August.

When asked about the outlook for the future, survey respondent Thomas Jaschik, president, BB&T Equipment Finance, said: “An increase in interest rates may help to spur activity in the equipment finance sector. Rising costs are always an impetus for taking action now versus later. Rising interest rates could be the catalyst to push companies to act now with respect to capital equipment acquisitions. This could create tremendous opportunities within the equipment finance market.”

Three quarters (74.1%) of survey respondents believe the US economy will “stay the same” over the next six months, up from 68.2% in August, and there has been a doubling in the proportion who think economic conditions will worse, up from 4.5% to 7.4%.

“We are still bullish as we head into the fourth quarter. Demand continues to be strong and in spite of the recent fluctuations of the stock market, our customers are continuing with business expansion projects and replacement of equipment,” said Valerie Hayes Jester, president, Brandywine Capital Associates.