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April’s Equipment Leasing Monthly Confidence Index Hits All-Time Lows

4/28/2020

April’s monthly MCI – EFI survey, designed to collect information indicating the prominent current and future business equipment finance environment, fell to a all-time low of 22.3 in April. For context, the entire 2019 year never saw monthly values below 50.
There was a significant decrease from March to April in optimistic sentiment from the survey respondents. An especially large change was seen regarding the following topics:
  • 93% of respondents believe that economic conditions will get worse before they get better in the months ahead
  • 90% believe demand for capital leases and loans will decline
  • Not one respondent expects more access to capital to fund equipment vs what they had previously. 
  • The most significant categorical move was an evaluation of the US economy. In March, 3.7% of respondents listed the economy as “poor”. In April, 100% of respondents gave the economy this lowest rating. 
These survey results, coupled with lower interest rates and a pent up supply of farm equipment at auctions, may result in some purchasing opportunities of used equipment in the coming months. When reviewing our Tractor Zoom data, the average auction sale price of all equipment has dropped approximately 12% during the past six weeks.  If a farmer has a need for critical equipment they may now be more likely to look for the value that used equipment offers. Obviously these investments won’t be without risks, as this survey states. Given the significant recent decline in lending sentiment, it would not be surprising if equipment values continue to follow suit. Shifting your chattel appraisals to emphasize recent sales (vs. long-range historic averages) may be a more accurate indication of current market value. 
If you are able to help a farmer purchase a used piece of equipment, having an accurate understanding of the true equipment value will be more important now than ever. Whether your organization is financing these purchases, or buying and selling at auctions, the economic months ahead will not tolerate much margin for error.
You can view the Lease Foundation’s full report here: https://www.leasefoundation.org/industry-resources/monthly-confidence-index/