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 November decreased 33.1 percent when compared to the same period in 2007. However, cumulative year-to-date new business volumes show a decrease of 2.1 percent compared to 2007.
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.
According to the November data, month-to-month new business volume declined by 33.0 percent, from $6.0 billion to $4.0 billion. Receivables over 30 days increased to 3.7 percent, the highest level since January 2006. Charge-offs increased to 1.09 percent as compared to 1.01 percent the prior month; compared to year-over-year data, charge-offs doubled in November.
Credit approvals reached historic lows (72.0 percent). Nearly half 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 declined in November (1.3 percent).
The recent performance of the equipment finance sector can be attributed to similar economic pressures that are affecting other financial markets. Frederick Summers, Chairman and Chief Executive Officer, Vision Financial Group, Inc., observed, "Reductions by the Fed in interest rates have not provided sufficient relief. This has resulted in a more restrictive equipment finance market reflected in lower new business volume."
"The equipment finance sector is beginning to feel the effects of the recession as companies pull back from investing in new plant and equipment," said ELFA president Kenneth E. Bentsen, Jr. "Portfolio quality shows slight deterioration, albeit from historically strong levels and well below that of other asset classes," Bentsen said.
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.
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