High interest rates weigh on equipment lender confidence

Equipment lenders are awaiting a Federal Reserve rate cut as prolonged high interest rates and tariff uncertainty have stifled capital investment.  

The Equipment Leasing and Finance Foundation’s (ELFF) Monthly Confidence Index, released today, dipped to 60.2 in August from 61.6 in July, ending three consecutive months of increases.  

While lender confidence remains well above the 19-month low of 41.9 in April, the “impact of tariffs, real or perceived, is still a risk,” Charles Jones, senior vice president of Exeter, Pa.-based 1st Equipment Finance, stated in the report.  

“As costs increase for everyday items and proposed tax cuts aren’t yet realized, we are in a state of wait-and-see,” he said.  

The equipment finance industry has mostly weathered the storm in 2025 in the wake of tariffs, with new business volume at a 1.8% year-over-year decrease at midyear. As lenders look to finish the year strong, “any relief on the Fed funds rate will certainly open up the economy,” James D. Jenks, chief executive of Scottsdale, Ariz.-based Global Financial and Leasing Services, stated.  

Meanwhile, nearly 27% of roughly 30 equipment financiers expect business conditions to improve over the next four months, down from 37.5% in July, according to the ELFF report.  

The percentage of lenders expecting increased loan and lease demand over the next four months also fell to 26.9% from 37.5% in July. Nearly 12% anticipate greater access to capital over that stretch, down from 16.7% last month.  

Dealers squeezed 

As high interest rates persist, dealers are urging their lending partners to offer flexible terms to lower monthly payments or they may seek a different partner, Matthew Isgrig, a sales representative at Landmark Equipment in Fort Worth, Texas, told Equipment Finance News.  

“I used to use this one [lender] all the time, but her bank just can’t do anything for me,” he said. “They’re not doing simple-interest loans. They’re basically doing finance leases where you’re going to pay the entire note no matter what. … You’re not getting a break.” 

A rate cut would also ease dealer challenges tied to high floorplan costs, Penske Automotive Group Executive Vice President and Chief Financial Officer Michelle Hulgrave said during the company’s July 30 earnings call. 

“When including floor plan, we have $4.6 billion of variable debt,” she said. “Fifty-four percent of our variable rate debt is in the United States. We estimate a 25-basis point change in interest rates would impact interest expense by approximately $12 million.” 

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