Industry maintains strong performance despite challenges
Washington, DC--The equipment finance market is projected to reach $903 billion in 2014, according to the ‘2014 State of the Equipment Finance Industry Report’ released at the 53rd Annual Convention of the Equipment Leasing and Finance Association. The study, published by the Equipment Leasing & Finance Foundation and authored by Keybridge Research, provides a unique look at trends in the equipment finance industry over the past year, identifies key drivers for future growth, and projects what the industry might look like in five to ten years.
“This year’s milestone 25th anniversary of the Foundation also signals an equipment finance industry milestone with the approach of $1 trillion in market size,” says Richard Gumbrecht, chairman of the Equipment Leasing & Finance Foundation and chief growth officer, EverBank Commercial Finance, Inc. “Despite macroeconomic data that indicates our industry may experience slowing growth compared to the rapid pace of the past few years, equipment finance companies of all shapes and sizes continue to find ways to improve business processes, enhance the customer experience, and provide much needed capital to the U.S. economy."
Key findings from the '2014 State of the Equipment Finance Industry Report' include:
- Strong overall performance despite industry challenges in 2013: Equipment and software investment is again at an all-time high percentage of GDP despite slow macroeconomic growth and a waning replacement cycle. In equipment finance, slower growth and unprecedented levels of liquidity created an environment of intense competition. Profitability dipped slightly, yet portfolio performance surpassed the previous year’s all-time best. A slow but steadily improving economy, solid corporate profits, and a focus on credit quality led to the lowest delinquencies and charge-offs on record.
- Propensity to finance increased in 2013 due to continued low interest rates: Leasing and financing have enjoyed solid, albeit slower, growth over the past several years. Total new business volume grew 9.3 per cent in 2013 which, while down from 16.4 per cent in 2012, is still a major improvement from the contractions and slow growth immediately following the recession of 2008-2009.
- Regulatory uncertainty less of a concern, but global tensions loom: After the government shutdown in 2013, policy uncertainty has steadily declined, which has improved confidence in the equipment finance sector. However, replacing the domestic uncertainty of 2012-2013 is a significant degree of geopolitical tension, including the Russia-Ukraine conflict and the U.S. intervention against terrorist groups in Iraq and Syria. Although the economic consequences of these conflicts have been relatively minor thus far, they have raised concerns over the stability of the European economy and the potential for a global oil price shock.
- The equipment finance market is projected to reach $903 billion in 2014: A solidifying economic recovery points to faster equipment and software investment growth in 2014. Total public and private sector equipment and software investment grew by only 3.2 per cent in 2013, but the equipment finance industry increased more than 8 per cent due to rising propensity to finance. Most investment activity was the result of an ongoing replacement cycle across many sectors.