In November 2024, the asset finance sector experienced a slight decline compared to the same period in 2023. According to the Finance & Leasing Association (FLA), total asset finance new business fell by 4%. However, for the eleven months leading up to November 2024, new business grew by 3% year-over-year. The commercial vehicle finance sector showed resilience with an 11% increase in new business, while other sectors like business new car finance and plant and machinery saw declines of 9% and 3%, respectively. FLA's Director of Research and Chief Economist, Geraldine Kilkelly, noted that despite the modest fall in November, the overall outlook for 2024 remains positive, with expectations of reaching approximately £39.7 billion in new business. The forecast for 2025, however, presents challenges due to uncertain demand and margin pressures.

November Performance Highlights

The asset finance market faced a downturn in November 2024, with a 4% decrease in new business compared to the same month in 2023. This decline was attributed to reduced lending to both small and medium enterprises (SMEs) and larger companies, which fell by 4% and 5%, respectively. Despite this setback, the commercial vehicle finance sector stood out as a bright spot, reporting an 11% increase in new business. Meanwhile, the business new car finance and plant and machinery sectors experienced declines of 9% and 3%, respectively.

The performance in November reflects the ongoing challenges within the asset finance industry. Smaller and larger firms alike have faced difficulties securing new financing deals, leading to a modest overall decline. However, the commercial vehicle finance sector demonstrated resilience, likely driven by increased demand for logistics and transportation services. The diverging performances across different segments highlight the complexities within the broader asset finance market. While some areas are thriving, others continue to struggle with economic uncertainties and fluctuating consumer confidence.

Outlook and Future Expectations

Despite the November dip, the asset finance market is on track to achieve record levels of new business in 2024, with projections nearing £39.7 billion. Looking ahead to 2025, the industry faces significant challenges, including uncertainty about demand and pressure on net margins. These factors have dampened business confidence and investment intentions. Nevertheless, the FLA's latest industry outlook survey indicates a cautiously optimistic stance, with nearly two-thirds of respondents expecting some growth in new business over the next year.

The outlook for 2025 underscores the need for adaptability and strategic planning within the asset finance sector. Lower inflation and interest rates provide a favorable environment, but businesses must navigate the uncertainties surrounding demand and profitability. The FLA's survey highlights the cautious optimism of industry players, who recognize the potential for growth amid challenging conditions. Companies will need to focus on innovation and customer-centric strategies to capitalize on emerging opportunities while mitigating risks. The coming year will be pivotal in determining how well the asset finance market can weather these challenges and continue its upward trajectory.