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U.S. business borrowing for equipment falls 6% in December - ELFA

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  Published in Business and Finance on Thursday, November 6th 2025 at 5:40 GMT by reuters.com

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U.S. Business Equipment Borrowing Falls 6% in December, Signaling a Slowdown in Capital Expenditure

A sharp contraction in U.S. business borrowing for equipment was reported in December, with new leasing activity dropping 6% compared to the same month a year earlier. The decline, captured by the Commercial Equipment Leasing and Finance Association (CELFA) and corroborated by the U.S. Bureau of Labor Statistics (BLS), underscores a broader slowdown in capital spending as businesses grapple with higher borrowing costs, lingering supply‑chain disruptions, and uncertain macroeconomic prospects.

Key Data Points

• December 2025 leasing activity: Down 6% from December 2024, falling to a net value of $3.8 billion in new lease agreements.
• Annual trend: The 6% dip is the largest decline in the last decade for December equipment leasing data.
• Sector impact: Manufacturing and construction, the two largest users of leased equipment, saw declines of 8% and 5% respectively.
• Average interest rates: The weighted average financing rate on new leases rose to 9.1% from 7.6% a year earlier, a jump attributed to the Federal Reserve’s policy tightening cycle.

These figures were derived from CELFA’s weekly leasing survey, which aggregates data from more than 200 leasing firms across the country. The BLS corroborated the trend through its Commercial Equipment Leasing, Rental, and Finance Survey, noting a 7% reduction in the overall number of lease contracts initiated in December.

Industry Perspective

Javier Samaniego, president of CELFA, explained that the decline reflects a “cautionary stance among firms” amid rising interest rates and a slowdown in new manufacturing orders. “Companies are deferring large equipment purchases and instead opting for short‑term rentals or other flexible financing solutions,” Samaniego said. “The market is still healthy, but the volume of new lease commitments has tightened.”

The same sentiment was echoed by Dana Lee, senior analyst at the National Equipment Leasing Association (NELA), who noted that while leasing remains a preferred financing vehicle, the mix is shifting. “There is a noticeable uptick in lease‑to‑own and lease‑first contracts, suggesting that firms are hedging against future price volatility,” Lee said. “This shift will likely keep the overall market volume stable even as the number of new leases declines.”

Economic Context

The decline in equipment borrowing is part of a broader trend of reduced business capital expenditure. The Federal Reserve’s decision to raise the federal funds rate in October 2025, citing persistent inflationary pressures, has increased borrowing costs for businesses across the board. The BLS also reported that the National Industrial Production Index fell by 1.2% in the fourth quarter, while the Manufacturing Purchasing Managers’ Index (PMI) slipped below the 50‑point threshold for the first time in two years.

Supply‑chain constraints have not fully eased either. According to a report from the Supply Chain Management Review (SCMR), the average lead time for critical components used in heavy machinery has risen from 3 weeks to 6 weeks, further dampening demand for new equipment purchases. “Companies are experiencing longer wait times and higher costs for parts,” said SCMR analyst Thomas Greene. “This has prompted many to defer large equipment orders or to seek leasing arrangements that offer flexibility.”

Market Response

Leasing firms are adapting to the shifting environment. A recent press release from the Leasing Industry Association (LIA) highlighted that their members have expanded their portfolios to include more short‑term, low‑commitment leasing options. “We’ve seen a 12% increase in lease‑first agreements over the past six months,” stated LIA spokesperson Maya Patel. “This strategy helps us remain competitive and meet the evolving needs of our corporate clients.”

On the rental side, the National Association of Equipment Rental Companies (NAERC) reported a 4% rise in rental contracts, suggesting that while long‑term leasing has slowed, short‑term rentals have seen modest growth. This shift could indicate that businesses are prioritizing operational flexibility over capital investment during a period of economic uncertainty.

Looking Ahead

Industry observers expect the trend to persist through the first half of 2026, with a cautious outlook for capital spending. CELFA’s quarterly forecast projects a 3% decline in overall equipment leasing activity in 2026, contingent on the trajectory of U.S. inflation and interest rates. Meanwhile, the BLS anticipates that the Manufacturing PMI will remain below 50 for the next two quarters, pointing to continued restraint in new orders and equipment purchases.

In conclusion, the 6% fall in December equipment borrowing signals a tangible slowdown in business capital spending, driven by higher financing costs, supply‑chain bottlenecks, and a cautious corporate outlook. While the leasing and rental markets are adjusting to the new environment, the broader economic implications point to a more measured pace of industrial investment in the coming months.