Equipment finance index shows 37% decline vs. June '08

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 June declined by 37 percent when compared to the same period in 2008. Month-to-month new business volume actually increased 24 percent from May to June, from $4.2 billion to $5.2 billion. For the second quarter of 2009, new business volume declined by 40.1 percent when compared to Q2 2008.

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 prepared 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 4.1 percent as compared to 4.7 percent in May. However, June delinquencies increased 100 basis points from the year-earlier reporting period. Charge-offs increased to 2.44 percent from 1.74 percent in the prior month, and more than doubled from June 2008. Credit approvals decreased to 65.4 percent from 66.3 percent in May, and from 74.0 percent in June 2008. Fifty-five 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 was virtually flat in the May-June period.

“While year-over-year declines improved in June as compared to April and May, the second quarter showed greater weakness as compared to Q1 2009 and Q4 2008 indicating that businesses continued to pull back from new investments while underwriting standards continued to tighten,” said ELFA president Kenneth E. Bentsen Jr.

At the same time, confidence in the equipment finance market is down slightly with a score of 49.2 for July 2009 compared to 51.8 for June 2009, according to a monthly confidence index released by the Equipment Leasing & Finance Foundation. The index reports a qualitative assessment of both the prevailing business conditions and expectations for the future as reported by key executives from the $650 billion equipment finance sector. Survey results are posted on the Foundation website, http://www.leasefoundation.org/IndRsrcs/MCI/

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 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.