The Equipment Leasing and Finance Association's (ELFA) Monthly Leasing and Finance Index (MLFI-25), which reports economic activity for the $600 billion equipment finance sector, showed December originations increased sharply over November, from $6.7 billion to $10.6 billion. According to year-end totals, new business volume for all of 2007 was five percent higher than 2006.
However, overall new business volume for December decreased seven percent when compared to December 2006. When comparing fourth quarter commercial equipment lease and loan activity for the past two years, new business volume remained flat, totaling $24.5 billion in both periods.
Portfolio quality remained steady in December. Receivables in both the current (under 30 days) and over 90-day categories were virtually unchanged in each of the past four months. December charge-offs showed a small up tick over the previous month (.59% vs. .62%), and have crept up ever so slightly since summer. Credit approval ratios improved when compared to November 2007, but is below approval rates in the same period last year.
Total headcount decreased in December by 1.3 percent compared to the previous month; however, year-over-year data showed a 12.4 percent drop.
"Though the equipment finance industry has been mostly insulated from the significant challenges and ensuing write downs in the consumer markets, growing re-adjustments are evident, especially on the funding side," said Roland Chalons-Browne, President and CEO of Siemens Financial Services, Iselin, NJ. "The market is moving towards a better alignment of risk and return, which should position the industry well in the event the challenges in the consumer and mortgage markets have a broader than anticipated impact on the overall economy." Siemens Financial Services is a participant in the ELFA monthly survey.
"Demand for financing of capital goods acquisition remained fairly strong as well as credit quality, given other factors in the economy" said Kenneth E. Bentsen, Jr., ELFA president. "That said, year over year growth was off in December and the fourth quarter which may indicate some pullback on investment due to uncertainty in the economy as a whole."
ELFA produces the MLFI-25 report to help member organizations achieve competitive advantage by providing them with leading-edge research and benchmarking information which supports strategic business decision making. The report is also a barometer of the trends in U.S. capital equipment investment.
Five components are included in the MLFI-25 survey: new business volume (originations); aging of receivables; charge-offs; credit approval ratios (approved vs. submitted); and headcount for the leasing and finance business.
The MLFI-25 provides metrics reflecting 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, which contributes to the representation of current business conditions nationally.
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. Along with the MLFI-25, which reflects levels of equipment financed, these reports provide a complete picture that describes the use of productive assets in the U.S. economy: equipment produced, acquired and financed.
Results of each MLFI-25 are posted on the ELFA website and in ELT, the Magazine of Equipment Leasing and Finance. To access ELFA's comprehensive industry information, please visit http://www.elfaonline.org/ind/research/
Participants in the ELFA MLFI-25:
- ADP Credit Corporation
- Bank of America
- Bank of the West
- Canon Financial Services
- Caterpillar Financial Services Corporation
- De Lage Landen Financial Services
- First American Equipment Finance
- Hitachi Credit America
- HP Financial Services
- Irwin Financial
- John Deere Credit Corporation
- Key Equipment Finance
- LaSalle National Leasing Corporation
- Marlin Leasing Corporation
- National City Commercial Corp.
- RBS Asset Finance
- Regions Equipment Finance
- Siemens Financial Services
- US Bancorp
- US Express Leasing
- Verizon Capital Corp
- Volvo Financial Services
- Wells Fargo Equipment Finance