Equipment Leasing and Finance Association - Equiping Business for Success

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Monthly Leasing and Finance Index July 2009

Jul 1, 2009, 16:22 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 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," Bentsen said.

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

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)
0709-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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