Leasing and finance index shows record-low volume

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 April declined by 42.5 percent when compared to the same period in 2008. Month-to-month new business volume decreased 12.8 percent from March to April, from $4.7 billion to $4.1 billion.

 

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 a financial indicator that 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 decreased to 4 percent as compared to 4.9 percent in March. Charge-offs decreased to 1.79 percent from 2.21 percent in the prior month. Credit approvals dropped to 59.9 percent from 64.3 percent. Sixty-eight 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 an increase of 2.9 percent in April.

 

“Although the April trends offer some reason for optimism, the MLFI-25 data from the past 16 months are emblematic of the continuation of a very challenging environment exemplified by reduced demand for capital goods and elevated underwriting standards,” said Ralph M. Martinez, senior vice president and chief operating officer, National City Commercial Capital Company LLC, a PNC company located in Cincinnati.

 

“Increased levels of default, weakened collateral values and an overburdened court system result in higher net loss performance," said Martinez, whose company is an MLFI participant. "Credit approval rates continue to suffer from poorer earnings performance from what were in better times, good risks. While hopeful that recovery is in process, this economic pause is very deep-seated and is not expected to reverse quickly.”

 

“Tight credit and the recession continue to impede new business volume,” said ELFA president Kenneth E. Bentsen Jr. “However, deterioration of portfolio quality, in terms of delinquencies and charge offs, may have crested.”

 

About the ELFA’s MLFI-25

The MLFI index is released globally from Washington, D.C., each month on the day before the U.S. Department of Commerce releases the durable goods report. 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.

 

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. 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.