Based on the latest data from the Equipment Leasing and Finance Association’s (ELFA) CapEx Finance Index (CFI), durable goods orders are expected to grow by 0.12% in the upcoming November advanced report on durable goods. That would be the fastest growth rate since July and a sign that demand for manufacturing goods has momentum heading into 2025.
“The November CapEx Finance Index shows that the equipment finance sector is poised to end 2024 on a high note,” Leigh Lytle, president and CEO at ELFA, said. “With strong balance sheets and healthy market conditions, the industry is well-positioned for growth, even if the Fed slows the pace of rate decreases next year. While challenges like a potential trade war could pose headwinds, easing regulations could spur equipment demand. Looking ahead, I foresee technological innovations by both lenders and end-users driving productivity and transforming the sector over the coming decade.”
Equipment demand strengthened further in November. New business volume for equipment leases and loans grew by over $10 billion from October to November, an increase of 0.7%. While the monthly growth rate slowed from October, this marks three consecutive months of expansion — the longest streak since March to May 2024. Year-to-date volume growth reached 4.2% November 2023, up from the 3.7% rate in October. Taken together, these trends indicate that equipment demand will remain strong through the end of 2024.
Growth in bank lending outweighs the slowdown in lending from equipment manufacturers. During the post-pandemic period, captives — equipment manufacturers — more than compensated for a decline in bank lending. However, this trend may be reversing. Over the past six months, lending by equipment manufacturers has declined by 10%, while lending from banks increased by 20%.
Employment contraction in the equipment finance sector may indicate rising productivity. After steady growth throughout most of 2024, employment declined in November, with year-over-year growth rate dropping by 0.6%. While this is the first decrease since June, the past five months have shown a substantial slowdown in hiring. Meanwhile, healthy growth in new business volumes suggests lenders are boosting efficiency.
The declining credit approval rate may signal increased borrower stress. In November, the rate for new leases and loans dropped to 74%, marking the steepest monthly decline since April and potentially reflecting financial strain in the manufacturing sector.
Despite a jump in charge-offs, lender balance sheets remain healthy. While average losses jumped in November, aging receivables over 30 days dropped to their lowest level since June 2023. This improvement suggests that the spike in losses could be a one-time event rather than a sign of broader financial stress.
“With the uncertainty of the presidential election results behind us and general stability of interest rates, all economic indicators point to a strong close to 2024 and into 2025,” Robert Moskovitz, chief financial officer of Verdant Commercial Capital, said. “Absent of geopolitical risks, the general outlook for equipment demand should continue to ride the tailwinds created by expected investments in infrastructure, onshoring of manufacturing, pent-up demand and the continued clearing of backlogs still remaining due to supply chain issues.”
