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 December declined by 13.3 percent when compared to the same period in 2007. Cumulative year-to-date new business volume declined by 3.6 percent, as compared to 2007. Month-to-month new business volume increased 120 percent from November to December, from $4.0 billion to $8.8 billion.
The MLFI-25 is the only index that reflects the volume of commercial equipment financed in the U.S. 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. 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.
Receivables over 30 days decreased to 3.5 percent as compared to 3.7 percent in November. For the year, receivables over 30 days were 100 basis points greater than 2007. Charge-offs increased to 1.18 percent as compared to 1.09 percent the prior month. Credit approvals reached another historic low (71.5 percent). Thirty-five percent of participant companies reported that fewer transactions were submitted for approval during the month, and underwriting standards tightened. Total headcount for equipment finance companies showed a slight decline in December (1.0 percent).
"As market conditions deteriorate and broad-based weakness continues, December data for the equipment finance sector indicated a relatively strong month, which is typical for end-of-year business activity. However, the year-over-year decline in volume levels reflects a very difficult economic and business environment as investment in capital equipment slows," said Kent M. Adams, President, Caterpillar Financial Services Corporation, Nashville, TN.
"The year-end numbers underscore the transformation of a financial market recession to a Main Street recession," said ELFA President, Kenneth E. Bentsen, Jr. "While demand for commercial credit held up through the first three quarters, as did credit quality, the fallout from the financial sector has spilled over. That said, even with some deterioration, the equipment finance sector has held up in comparison to some other asset classes," said Bentsen.
In 2009, Citicorp and Irwin Financial will be replaced in the MLFI-25 by Dell Financial Services, the finance subsidiary of Dell Inc., and Susquehanna Commercial Finance, a subsidiary of Susquehanna Bank/Susquehanna Bancshares. Citicorp and Irwin Financial are being replaced due to changes in their equipment finance operations.
About the ELFA's MLFI-25
The 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. More information on the Monthly Leasing and Finance Index, including methodology and participants is available below and at http://www.elfaonline.org/ind/research/
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
- De Lage Landen Financial Services
- Dell Financial Services
- Fifth Third Bank
- First American Equipment Finance
- 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
- US Bancorp
- US Express Leasing
- Verizon Capital Corp
- Volvo Financial Services
- Wells Fargo Equipment Finance