Tariffs, tax breaks, distress shape equipment lenders’ outlook

After an uneven start to 2025, equipment lenders are cautiously optimistic about the second half of the year amid ongoing tariff uncertainty, new tax breaks and flashes of financial stress. 

The Equipment Leasing and Finance Foundation (ELFF) projects equipment and software investment to grow at an annualized rate of 2.1% in the third quarter and 3.2% in Q4, culminating in a 6.3% jump in 2025, according to its July 16 economic outlook report.  

Nearly 38% of roughly 30 equipment financiers surveyed expect loan and lease demand to increase over the next four months, up from 29.6% in June, according to ELFF’s July 17 Monthly Confidence Index.  

Opposing forces of tariffs, bonus depreciation 

While tariff pessimism has eased considerably since April, economic uncertainty is expected to remain a hindrance despite the potential benefits of 100% bonus depreciation, John Gougeon, president of Ann Arbor, Mich.-based UniFi Equipment Finance, told EFN. Full bonus depreciation was restored July 4 as part of President Donald Trump’s One Big Beautiful Bill Act. 

“We had a huge win with the Big Beautiful Bill passage in 100% expensing. It should open the floodgates.”

— John Gougeon, president, UniFi Equipment Finance

“And then what happens? We announce another round of tariffs,” he said. “So, everybody’s back into a tailspin. … Until we get some stability out of Washington, I think money is going to stay on the sideline as it has for the first half of the year.” 

New business volume in equipment finance, which fell 1.2% year over year through May, has been fluctuating in 2025, according to the Equipment Leasing and Finance Association. 

Meanwhile, some lenders are optimistic that tariffs will eventually provide a boost to the industry if onshoring attempts are successful, Paul Fogle, managing director at Carmel, Ind.-based Quality Equipment Finance, told EFN. 

“I think it will level the playing field on a lot of our goods that get heavily taxed in other countries,” he said. 

In addition, businesses that have held off from large purchases due to tariff uncertainty could emerge as borrowers later this year amid “pent-up demand,” UniFi’s Gougeon said.  

Financial stress on horizon?

While financial conditions have mostly held steady this year, there have been some flashes of distress, including: 

• Charge-offs hitting their highest level since September 2020 in March; 
• More than 20 freight companies filing for bankruptcy since the start of Q2; and
• Delinquencies of 30-plus days rising 90 basis points in May. 

Contributing to a tight truck financing climate, lenders in the past year have taken “heavy losses on trucks that were financed during the COVID boom, subsequently repossessed and auctioned for pennies on the dollar,” Jarrett Harris, director of research at IronAdvisor Insights, said in a July 9 company video. 

While lenders steering clear of the truck market is understandable, their hesitancy to repossess and liquidate are delaying the freight industry’s recovery, Harris said. 

But apart from the transportation sector, lenders expect financial conditions to remain stable, Quality Equipment’s Fogle said. 

“It seems like businesses are holding their own despite the uncertainty,” he said. “I hope the markets get more certainty… but delinquencies are certainly manageable right now.” 

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