Equipment finance volume increased in 2022
Equipment Leasing Finance Association (ELFA) 2023 survey of equipment finance activity reveals new business volume increased 6.3 percent in 2022.
This is a modest decrease from new business volume (NBV) growth of 7.4 percent in 2021. The 2023 SEFA reveals key statistical, financial and operations information for the $1 trillion equipment finance industry, based on a comprehensive survey of 102 equipment finance companies.
“We are pleased to share the results of the 2023 Survey of Equipment Finance Activity. This comprehensive source of industry data is made possible by ELFA member companies who responded to the survey, and we thank them for their participation,” says Bill Choi, ELFA vice president of Research & Industry Services. “I encourage all members to review the data and put it to work for your business. If you have any questions about benchmarking your company, using our interactive dashboard or other SEFA tools, please feel free to contact me.”
Survey highlights
Key findings for 2022 as reported in the 2023 SEFA include:
- New business volume at equipment finance companies continued to be strong after rebounding in 2021 from the pandemic. Among survey respondents, 75 percent experienced an increase in volume in 2022.
- Cost of funds were a major takeaway of this year’s report with a jump of 211 basis points (bps) between 2021 and 2022 as a result of Federal Reserve interest rate hikes. Managing this cost of funds increase will be a major emphasis as equipment finance companies make their way through the current higher-interest-rate climate.
- By organization type, banks saw a 7.4 percent increase in new business volume, captives remained flat and independents, representing a much smaller group, saw a 29.4 percent increase.
- By market segment, NBV rose a modest 0.2 percent in the large ticket segment, while it increased 7.3 percent year over year in both middle and small ticket.
- From an asset perspective, the top-five most-financed equipment types were transportation, agriculture, construction, IT & related technology services, and industrial & manufacturing. The top five end-user industries representing the largest share of new business volume were services, agriculture, industrial & manufacturing, transportation and construction.
- Use of electronic documents continued to grow with 88 percent of respondents reporting that at least some of their NBV is documented via an electronic document. This number has risen steadily over the past five years, up from 50 percent of respondents in 2018.
- Delinquencies increased to 2.3 percent overall, from 1.1 percent in 2021, with mining/oil & gas extraction and transportation-railroad continuing to experience the highest delinquency rates.
- Charge-offs decreased slightly to 0.22 percent of average receivables in 2022 due to a stronger recovery rate that was much higher than the previous years’ amounts.
- Credit approvals increased year over year, while the percentage of those approved applications being booked declined slightly. The number of applications decreased, but the dollar volume increased, an indication of the inflation the overall economy is experiencing.
- Employment increased by 3.8 percent overall. Independents, captives and banks increased their headcount by 8.5 percent, 4 percent and 2.5 percent respectively year over year.
- Work location arrangements reveal hybrid models show no signs of abating. More than 90 percent said they spend some of their time working remotely, and 36 percent report they spend fewer than five days a month working in a company office location. By comparison, pre-COVID, 84 percent of the respondents’ workforces went to the office fulltime.
In addition to the 2023 SEFA, ELFA released the 2023 Small-Ticket SEFA, which focuses on small-ticket and micro-ticket equipment transactions among the SEFA respondents. The report found that new business volume in the small-ticket space increased by 7.5 percent in 2022.
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