In a significant development, the equipment finance sector has witnessed robust growth, particularly in December 2024. The total new business volume surged by $11.4 billion, marking an 8.1% increase from November to December. This growth reflects a broader expansion of 4.2% year-over-year. Charge-offs decreased to 0.52%, signaling improved financial health within the industry. Bank financing played a pivotal role in driving this surge, with a record-breaking 36.2% monthly rise. Despite employment contraction and modest credit approval rates, industry leaders remain optimistic about the future, attributing the positive outlook to increased certainty following recent elections and stable interest rates.
December's Record-Breaking Surge in Equipment Finance Activity
In the final month of 2024, the equipment finance sector experienced a remarkable upturn. Amidst the vibrant economic climate, surveyed companies reported a substantial leap in new business volumes, reaching $11.4 billion—a striking 8.1% increase from the previous month. This upward trend was especially notable among member firms of the Equipment Leasing and Finance Association (ELFA), which observed a year-over-year expansion of 4.2%. Notably, charge-offs declined to 0.52%, reversing the uptick seen in November.
The banking sector was the primary catalyst behind this impressive performance. Banks recorded a staggering 36.2% rise in new business activity from November to December, overshadowing the modest gains in captive and independent financing segments. This unprecedented jump propelled bank-financed transactions to nearly 62% of the total new business volume, the highest share since pre-global financial crisis levels.
However, not all sectors experienced such prosperity. Employment in the equipment finance industry contracted by nearly 2.0% over the past year, with banks and captives witnessing declines of 1.2% and 7.1%, respectively. Independents managed a slight headcount increase of 2.5%. Meanwhile, the credit approval rate edged up to 74.3%, although it remained close to its 2024 low point. Small-ticket financing approvals saw their largest one-month boost since March, rising by 3.6 percentage points.
Despite these mixed indicators, industry executives are cautiously optimistic about the coming year. They anticipate that reduced regulatory burdens could stimulate demand for construction and mining equipment, positioning the sector to navigate potential economic turbulence in 2025.
Tina Eickhoff, Senior Vice President of U.S. Bank’s Equipment Finance division, highlighted the resilience of the U.S. economy as a key factor supporting the sector’s robust performance at the end of 2024. With greater clarity on interest rates and economic policies post-election, she expects businesses to prioritize growth projects involving new equipment purchases.
Industry Outlook and Implications
The resurgence in equipment finance activity underscores the strength and adaptability of the U.S. economy. As businesses gain more confidence in the stability of interest rates and federal policies, they are likely to invest in capital expenditures, fostering further growth. The ELFA’s Monthly Confidence Index, which rose for the third consecutive month in January, reinforces this optimistic sentiment.
This positive trajectory suggests that despite uncertainties surrounding immigration and trade policies, the equipment finance industry is well-prepared to meet the challenges ahead. The continued support from resilient economic conditions and favorable financial metrics positions the sector for sustained success in 2025. Leaders like Leigh Lytle, President and CEO of ELFA, emphasize that while there may be fluctuations in the coming months, the overall momentum remains strong, promising a prosperous year ahead.