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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 overall new business volume for January decreased 2.6 percent when compared to January 2007. While banks and independent finance companies showed a slow down in originations (about 60 percent of companies showing declines year over year), captive finance companies showed solid year over year growth (13.7 percent) in January.
The MLFI-25 also showed January originations decreased sharply over December, from $10.6 billion to $5.9 billion. Decline was anticipated due to the cyclical nature of the equipment finance business.
Portfolio quality remained stable in January. Receivables in the current (under 30 days) category were unchanged when compared to the previous month. Receivables in the past due category (over 30 days) also remained unchanged compared to the previous month. Overall, it is noteworthy that receivables continue to show historically low levels of delinquency.
After three months of consecutive increases, January charge-offs declined over the previous month (.65 percent vs. .57 percent). Credit approval ratios declined slightly when compared to December 2007. Total headcount increased in January by 4.1 percent compared to the previous month.
"The good news from the January report is that equipment finance companies are seeing stable credit quality and only a slight decrease in new business volume year-over-year," said Doug Bowers, President, Banc of America Leasing, based in Charlotte, NC. "Given the challenges of the current economic market, I am encouraged by the report. It would seem to reflect prudent financing, and that's good for both lessors and lessees," said Bowers, whose company participates in the monthly survey.
"January's report would indicate that businesses continue to invest in capital goods, albeit at a slightly lower pace, even in light of economic uncertainty," said ELFA President Kenneth E. Bentsen, Jr.
MLFI-25 Methodology
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 equipment 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/
Media Only: Charts and graphs are available for the media upon request; please contact Diane Zyats at dzyats@elfaonline.org
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Participants in the ELFA MLFI-25:
- ADP Credit Corporation
- Bank of America
- Bank of the West
- Canon Financial Services
- Caterpillar Financial Services Corporation
- CIT
- Citicapital
- De Lage Landen Financial Services
- First American Equipment Finance
- GreatAmerica
- Hitachi Credit America
- HP Financial Services
- Irwin Financial
- John Deere Credit Corporation
- Key Equipment Finance
- 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
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