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 the second quarter increased 3.2 percent when compared to the same period 2007. In fact, new business volume for equipment finance companies in June was stronger than any month in 2008.
The MLFI-25 is the only index that reflects levels of equipment financed in the U.S. economy. 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 these reports provide a complete picture that describes the use of productive assets in the U.S. economy: equipment produced, acquired and financed.
According to the June data, originations month-to-month increased by 16.7 percent to $8.4 billion. Respondents' portfolio performance was mixed: receivables in the less-than-30 day category were 97.1 percent in June, up nominally from the prior month. Conversely, charge-offs reached their highest point since January 2006 (0.88 percent) and are running nearly double the level experienced during the same month in the previous year.
Credit approval ratios (76.6 percent) increased 0.4 percent when compared to the prior month (76.2 percent). Total headcount for equipment finance companies has been relatively stable since February 2008 showing slight increase of 1.4 percent.
"The June MLFI indicates some softening in the equipment finance originations as compared to same period in 2007 and an up tick in charge offs. That said, the second quarter ended with originations up 3.2 percent YOY after a tepid first quarter, making the year to date flat," said Kenneth E. Bentsen, Jr., ELFA President. "Delinquencies are holding steady, and a slight increase in charge-offs notwithstanding, would indicate that investment in capital goods has at the very least held its own in an otherwise troubled economic environment," said Bentsen.
ELFA produces the MLFI-25 survey to help member organizations achieve competitive advantage by providing them with leading-edge research and benchmarking information which supports 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 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.
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
- Fifth Third Bank
- First American Equipment Finance
- 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