Equipment leasing/finance index shows decline flattening

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 July declined by 35.1 percent when compared to the same period in 2008. Month-to-month new business volume actually decreased 7.7 percent from June to July, from $5.2 billion to $4.8 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 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 3.9 percent as compared to 4.1 percent in June. This represents the first consecutive month decrease since June 2008. On a year-over-year basis, receivables over 30 days increased by 18.2 percent. Charge-offs decreased sharply to 1.67 percent from 2.44 percent in the prior month but rose by 56.1 percent compared to July 2008. Credit approvals remained flat at 65.5 percent and declined from 73.3 percent in July 2008. Total headcount for equipment finance companies decreased slightly in the June-July period.

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. In a separate study, the Federal Reserve Board July 2009 Senior Loan Officer Opinion Survey reported weaker demand for commercial and industrial loans. Forty-five percent of respondents reported weaker demand for large firms and 55 percent reported weaker demand for small firms.  

“The July numbers seem to indicate that the steep decline in new business volume and portfolio deterioration may have crested in April,” said ELFA president Kenneth E. Bentsen Jr. “While still declining on an annual basis, the trajectory of the decline is flattening, indicating possibly a sign of recovery in the capital equipment finance business.”

The Equipment Leasing & Finance Foundation's Monthly Confidence Index for August rose to 54.9 up from 49.2 in July. This somewhat more optimistic outlook reflects respondents' belief that business conditions will not worsen over the coming quarter. For more detailed information on the Monthly Confidence Index, visit www.LeaseFoundation.org

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 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.