Stress in the transportation sector drove 60-plus-day delinquencies for equipment asset-backed securities higher in May, but diversified portfolios led to stable performance overall.
Delinquencies of more than 60 days in Kroll Bond Rating Agency’s (KBRA) Equipment Loan & Lease Index for May rose 34 basis points (bps) month over month and 66 bps year over year to 1.8%. Large-ticket delinquencies increased 41 bps MoM, while small to medium-ticket delinquencies jumped 22 bps MoM.
Meanwhile, annualized net losses in the index fell 29 bps MoM but rose 3 bps YoY to 0.79%. Recoveries increased 18.1 percentage points MoM and 16.6 percentage points YoY to 50.8%.
The index comprised 119 securitized equipment loan and lease pools with an aggregate collateral balance of $36.8 billion.
While net losses and delinquencies have “normalized” in 2025, financial stress persists in the transportation sector, Joanne DeSimone, managing director of commercial ABS at KBRA, told Equipment Finance News.
“On the large-ticket side, where you do see that there is somewhat of a trend upward of delinquencies and net losses, that really has been driven over the past two years by the stress in transportation assets, the stress in trucking,” she said.
Some ABS pools are more concentrated in trucking loans, DeSimone said. Servicers for these truck loans often “follow an approach where they will quickly repossess the trucks, which would cause the losses to increase, but then they’re not going to immediately sell all the repossessed inventory.
“But they’re rather going to strategically sell the inventory so that they can maximize the proceeds,” she said. “So, there’s a lag of the recoveries coming in after the repossessions. The net losses will then go down when the recoveries start coming in.”
Equipment finance resilient
While a few truck-centric ABS pools led to higher 60-plus-day delinquencies last month, overall performance was “solid” largely because of portfolio diversification, DeSimone said. Equipment loan and lease pools have also been mostly resilient to economic challenges including tariff uncertainty, she said.
Reflecting that resilience, equipment finance credit approvals rose to 77.4% in April, the highest rate in more than two years, according to a May 22 report by the Equipment Leasing and Finance Association (ELFA). Delinquencies of more than 30 days also fell more than 40 bps to 1.8%.
Equipment lenders are “cautiously optimistic” as they continue to navigate economic uncertainty, Daryn Lecy, chief operating officer at Oakmont Capital Services, stated in the ELFA report.
“Our industry is comprised of talented individuals and creative problem solvers who will adapt and position themselves to secure opportunities in any economic conditions,” he said.
