Equipment leasing activity continued to rise during October, according to the latest Monthly Leasing and Finance Index from the Equipment Leasing & Finance Association (ELFA).
The index, which reports economic activity from 25 companies across the equipment finance sector, posted a 9 percent increase in new business during October on a year-over-year basis, reaching $8.3 billion.
“ELFA members report strong growth in new business volume, albeit tempered by continued margin compression in many sectors,” ELFA President and CEO William Sutton said in a media release. “The U.S. economy continues to expand at a modest rate, providing a welcome stimulus for investment in business equipment. Portfolios are performing relatively well, although delinquencies are showing some slight volatility. Most economic indicators – lower fuel prices, reduced unemployment and a robust equity and bond market – all point to a strong fourth quarter, absent some unforeseen development.”
Receivables over 30 days rose 1.2 percent on a monthly basis, as well as 0.9 percent from the same time last year. Meanwhile, charge-offs were stagnant for the seventh straight month, remaining at an all-time low of 0.2 percent.
Credit approvals decreased on a monthly basis, falling from 79.7 percent in September to 78.3 percent in October. However, total headcount for equipment finance companies was up by 0.7 percent on an annual basis.
Increases in business activity boost confidence
The annual increase in equipment leasing activity could help explain why confidence in the leasing industry is at a six-month high. The Equipment Leasing & Finance Foundation reported the November 2014 Monthly Confidence Index for the Equipment Finance Industry reached 64.2, up from 60.4 in October and the highest level since May.
“The mid-term elections are now over and consumer confidence seems to be improving as gas prices and unemployment statistics continue to decrease,” said Valerie Hayes, one of the respondents to the Monthly Confidence Index survey. “We have experienced an increase in demand for capital equipment purchases and, more importantly, financing for those orders. Another important note is that the equipment being requisitioned appears to be associated with business expansion and not just replacement of older assets.”
A little more than 30 percent of survey respondents said they expect demand for leases and loans to fund capital expenditures to rise over the next four months, up from just 25.7 percent during October. Additionally, 21.2 percent of executives said they expect access to working capital to fund equipment acquisitions to increase in the four months ahead.