Financing and leasing companies (FLCs) are well positioned from a financial and credit perspective heading into 2013, according to Fitch Ratings. Fitch's outlook covers issuers in both the consumer and commercial financing segments.

Sector strengths include reduced leverage, relatively stronger capital, liquidity and funding profiles, tightened underwriting standards, and more rationalized cost structures. These factors will help issuers navigate some of the headwinds facing this sector and help to maintain ratings stability.

Asset quality has significantly improved, driven by positive economic indicators in the U.S., rising consumer confidence and robust residual values for used assets and equipment. Broad based production and capacity cuts in the downturn have also resulted in robust residual values for all asset classes, supporting higher recoveries.

Fitch expects a modest weakening in asset quality trends in 2013, as credit normalization begins to unfold.

Leverage metrics, although below pre-crisis levels, have generally trended higher in 2012 driven primarily by portfolio growth, improved funding access and resumption of dividends/share buybacks. Still, Fitch expects issuers will manage leverage and liquidity levels conservatively given the uncertain economic recovery and ongoing euro zone debt concerns, which could potentially weaken credit quality or disrupt access to funding markets.

Fitch believes key industry risks are primarily macroeconomic in nature, related to the fragile U.S. economic recovery, the still relatively weak housing market, and constrained loan/lease demand. Uncertainties related to the euro zone debt crisis and the U.S. 'fiscal cliff' situation could potentially worsen demand.