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Monthly Leasing and Finance Index August 2009

Aug 1, 2009, 16:20 PM

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 August declined by 35.1 percent when compared to the same period in 2008. For 2009, the MLFI reported month-to-month new business volume decreased 22.9 percent from July to August, from $4.8 billion to $3.7 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 increased to 5.0 percent as compared to 3.9 percent in July. On a year-over-year basis, receivables over 30 days increased by 47.1 percent. Charge-offs increased sharply to 2.5 percent from 1.67 percent in the prior month and rose by 115.5 percent compared to August 2008. Credit approvals improved to 67.6 percent when compared to the previous month, however, they declined from 72.6 percent in August 2008. Total headcount for equipment finance companies decreased slightly in the July-August period.

Seventy-five percent of participant companies reported that fewer transactions were submitted for approval during the month, due to tightening underwriting standards and lower demand.

"The MLFI-25 data illustrate a pattern of stagnant growth in new business volume and at the same time, some deterioration in credit quality," said ELFA Interim President Ralph Petta. "It should come as no surprise to those following the equipment finance sector that it will take some time for troubled portfolios to work their way through the system," Petta said.

The Federal Reserve Board released its charge-offs and delinquency statistics for the second quarter 2009 for financial institutions. Comparing all products offered by financial institutions, lease financing receivables performed well with a 1.52 percent charge off ratio compared to 2.64 percent for all financial products. Delinquencies for lease financing receivables (defined as over 30 days) dropped to 2.13 percent. Lease finance receivables were one of the best performing financial product categories compared to an overall average of 6.15 percent for financial products.

The Equipment Leasing & Finance Foundation's Monthly Confidence Index for September dropped slightly to 53.8 compared to 54.9 in August. The majority of survey respondents believe business conditions will continue to stabilize over the next four months. For more detailed information on the Monthly Confidence Index visit http://www.LeaseFoundation.org/

About the ELFA's MLFI-25
The MLFI index 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 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. Please visit http://www.elfaonline.org/ind/research/ for additional information.

Participants in the ELFA MLFI-25:

  • 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

MLFI-25 New Business Volume
(Year Over Year Comparison)
0809-NewBusVol

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Aging of Receivables:

AgingofRcv.png

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Average Losses (Charge-offs) as a % of net receivables
(Year Over Year Comparison)
Average Losses

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Credit Approval Ratios As % of all Decisions Submitted
(Year Over Year Comparison)
Credit Approval Ratios

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Total Number of Employees
(Year Over Year Comparison)
Total Number of Employees

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