ELFF: Equipment investment growth to taper, then take off

Equipment investment is expected to slow in the fourth quarter before heating up in 2025 as businesses resume activity amid loosened lending standards. 

Equipment and software investment volume is projected to rise at an annualized rate of 2.6% in Q4, down from about 3.7% in Q3 and 7% in Q2, according to the Equipment Leasing and Finance Foundation’s Q4 industry snapshot report, released Nov. 4 Equipment and software investment is projected to increase 4.4% for 2024.  

Expectations of a second Federal Reserve interest rate cut and uncertainty surrounding the U.S. presidential election likely contributed to modest Q4 expectations. But with the Nov. 7 rate cut and the election decided, equipment financiers and businesses alike should no longer hold back, Matt Manero, president of Carrollton, Texas-based Commercial Fleet Financing, told Equipment Finance News. 

“There’s no caution in our decision-making,” he said. “All lights are green in my eyes from an economic standpoint. Everybody should have a renewed confidence to go and grow their business and get after it.” 

While financing activity is poised to pick up in 2025, banks will likely lag due to their conservative nature, he said.  

New business volume soaring 

Meanwhile, new business volume in the equipment finance industry is expected to rise 3.4% to $120.1 billion in 2024, and rate cuts should stimulate growth in 2025, according to the ELFF report.  

While the economic outlook is a little clearer following the election, equipment lenders must be prepared for changes related to compliance and distribution channels, Neal Garnett, chief commercial officer at global equipment financier DLL, told EFN. 

“We have to be very informed and forward-looking about what distribution changes happen and what the mix is,” he said. “Are there going to be more mega dealers? Is there going to be more direct-to-consumer sales or even third-party platforms?”