Equipment leasing and finance index shows upturn in new business

The Equipment Leasing and Finance Association’s (ELFA) Monthly Leasing and Finance Index (MLFI-25), which reports economic activity for the $518 billion equipment finance sector, showed overall new business volume for February declined three percent when compared to the same period in 2009. When shown against the prior month, the MLFI-25 reported new business volume decreased by six percent, from $3.4 billion to $3.2 billion. (Of note is the fact that, in the last four years, the average January to February decline averaged approximately 17 percent.)

According to a separate survey commissioned by CFO.com, capital spending is expected to increase nine percent in 2010.

Tempering this advance in new business volume is February data showing a noticeable increase in delinquencies. Receivables over 30 days rose significantly when compared to both the prior month and year-earlier period. However, upon further analysis, this anomaly appears to be the result of one outlier respondent that reported a larger than usual number in the 30-60 day receivables bucket. Charge-offs increased to 1.89 percent, up from 1.68 percent in the prior month.  

Credit approvals decreased to 69 percent in February, up from 65.0 percent in the same period the prior year. Almost half of participating organizations reported submitting fewer transactions for approval during the month. Total headcount for equipment finance companies decreased by one percent in the January-February period.

And, once again, the construction and trucking transportation industries led the underperforming sectors.

“The fact that February new business volume is down compared to February 2009's anemic numbers tells you that we still have a long way to go in the economic recovery,” said Thomas Jaschik, president, BB&T Equipment Finance, located in Towson, Md. “Businesses continue to lack the confidence to make substantial investments in capital equipment. The increase in delinquencies and charge-offs from January to February has a seasonal factor associated with it, but is not a trend you like to see given the run up in these two items in 2009.”

“Recent anecdotal information from ELFA members as well as hard data here seem to indicate that the nascent economic recovery is giving at least some businesses reason to feel confident about investing in capital assets,” said Ralph Petta, ELFA interim president. “Hopefully, as we move in to the second quarter of the year and beyond, this growth trend continues and is sustainable,” said Petta.

A related index, the Equipment Leasing & Finance Foundation's Monthly Confidence Index (MCI-EFI), for March was at 60.1, relatively on par with February 2010 index of 60.6.

The MCI-EFI is a monthly survey of equipment finance industry executive leadership that provides a qualitative assessment of both the prevailing business conditions and expectations for the future. Since the same organizations provide the data from month to month, the results constitute a consistent barometer of the industry’s confidence. For more information, visit http://www.leasefoundation.org/IndRsrcs/MCI/.

About the ELFA’s MLFI-25
The MLFI-25 is the only index that reflects capex, or the volume of commercial equipment financed in the U.S. The MLFI-25 is released globally at 9:00 a.m. Eastern time from Washington, D.C. each month, on the day before the U.S. Department of Commerce releases the durable goods report. The MLFI-25 is a financial indicator that complements the durable goods report and other economic indexes, including the Institute for Supply Management Index, which reports economic activity in the manufacturing sector. Together with the MLFI-25 these reports provide a complete view of the status of productive assets in the U.S. economy: equipment produced, acquired and financed.

The latest Monthly Leasing and Finance Index, including methodology and participants, is available below and also at http://www.elfaonline.org/ind/research/MLFI/.

MLFI-25 Methodology
The ELFA produces the MLFI-25 survey to help member organizations achieve competitive advantage by providing them with leading-edge research and benchmarking information to support strategic business decision making.

The MLFI-25 is a barometer of the trends in U.S. capital equipment investment. Five components are included in the survey: new business volume (originations), aging of receivables, charge-offs, credit approval ratios, (approved vs. submitted) and headcount for the equipment finance business.

The MLFI-25 measures monthly commercial equipment lease and loan activity as reported by participating ELFA member equipment finance companies representing a cross section of the equipment finance sector, including small ticket, middle-market, large ticket, bank, captive and independent leasing and finance companies. Based on hard survey data, the responses mirror the economic activity of the broader equipment finance sector and current business conditions nationally.

ELFA MLFI-25 Participants

• ADP Credit Corporation
• Bank of America
• Bank of the West
• Canon Financial Services
• Caterpillar Financial Services Corporation
• CIT
• De Lage Landen Financial Services
• Dell Financial Services
• Fifth Third Bank
• First American Equipment Finance
• GreatAmerica
• HitachiCredit America
• HP Financial Services
• John Deere Credit Corporation
• Key Equipment Finance
• Marlin Leasing Corporation
• National City Commercial Corp.
• RBS Asset Finance
• Regions Equipment Finance
• Siemens Financial Services
• Susquehanna Commercial Finance Inc.
• US Bancorp
• Tygris Vendor Finance
• Verizon Capital Corp
• Volvo Financial Services
• Wells Fargo Equipment Finance

About the ELFA
The Equipment Leasing and Finance Association (ELFA) is the trade association that represents companies in the $518 billion equipment finance sector, which includes financial services companies and manufacturers engaged in financing capital goods. ELFA members are the driving force behind the growth in the commercial equipment finance market and contribute to capital formation in the U.S. and abroad. Its over 600 members include independent and captive leasing and finance companies, banks, financial services corporations, broker/packagers and investment banks, as well as manufacturers and service providers. For more information, visit www.elfaonline.org.