Equipment finance sector down again in February

The Equipment Leasing and Finance Association’s (ELFA) Monthly Leasing and Finance Index (MLFI-25), which reports economic activity for the $650 billion equipment finance sector, showed overall new business volume for February declined by 37.7 percent when compared to the same period in 2008. Month-to-month new business volume decreased 26.7 percent from January to February, from $4.5 billion to $3.3 billion. This follows a 24 percent decline in January (YOY) volume.

 

The MLFI-25 is the only index that reflects the volume of commercial equipment financed in the U.S. The MLFI-25 complements other relevant economic indices, including the monthly durable goods report produced by the U.S. Department of Commerce, which reflects new orders for manufactured durable goods, and the Institute for Supply Management Index, which reports economic activity in the manufacturing sector. Together with the MLFI-25 these reports provide a complete picture of the status of productive assets in the U.S. economy: equipment produced, acquired and financed.

 

The MLFI-25 reported receivables over 30 days increased to 4.5 percent as compared to 3.9 percent in January. Charge-offs increased to 1.74 percent from 1.41 percent in the prior month. Credit approvals dropped to 64.7 percent from 65.2 percent, surpassing January’s record low. Forty-seven percent of participant companies reported that fewer transactions were submitted for approval during the month, due to tightening underwriting standards and lower demand. Total headcount for equipment finance companies showed a slight decline in February (one percent).

 

“In the near term, we see continued deterioration of customer credit quality and delays in capital spending as companies re-evaluate the current economic situation. These factors have been driving the overall decline in new business volume in the equipment finance sector,” said Anthony Cracchiolo, president, U.S. Bank Equipment Finance, Portland, Ore. US Bank Equipment Finance is an ELFA member and a participant in the MLFI-25. “Some markets have been less hard hit and we do expect delays in spending to result in pent up demand for equipment in a variety of industries late in the year and into early 2010,” said Cracchiolo.

 

“After finishing the fourth quarter of 2008 down, the first quarter of 2009 continues on a downward trend as businesses pull back from making new investments in plant and equipment,” said ELFA President Kenneth E. Bentsen, Jr. “We also witnessed continued deterioration in portfolio quality, albeit better than many other asset classes,” Bentsen said.

 

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.

 

The results of each MLFI-25 are posted on the ELFA website. ELFA is the premier source for statistics and analyses concerning the equipment finance sector. Please visit http://www.elfaonline.org/ind/research/ for additional information.

 

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

Hitachi Credit 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 $650 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 700 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.