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 September decreased 2.4 percent when compared to the same period in 2007. When comparing 3Q 2007 to 3Q 2008, new business volume was down 0.1 percent. However, cumulative year-to-date new business volumes show an increase of 1.9 percent compared to 2007.
The MLFI-25 is the only index that reflects the volume of 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 September data as reported by the twenty-five banks, finance companies and manufacturers that comprise the MLFI-25, month-to-month new business volume increased by 22.3 percent, from $5.3 billion to $6.5 billion. Receivables in the less-than-30-days category, a measure of non-delinquent accounts, were 96.8 percent, down slightly from the prior month, but showing a steep decline from the prior year period. Delinquent accounts (31-60 days) increased 48 percent since June of this year. Charge-offs were relatively flat, but still high when compared to year-over-year data.
Credit standards appear to have remained relatively stable compared to the previous month, with credit approval ratios increasing 0.1 percent to 73.8 percent. Total headcount for equipment finance companies remained relatively flat in the August-September period.
"September's nominal monthly volume increase followed historical trends as lessors were motivated to book tax lease volume due to requirements of the "60/40" rule for accelerated depreciation deductions," said Thomas M. Jaschik, President, BB&T Equipment Finance, Towson, MD. "The year-to-date volume increase can be attributed somewhat to greater utilization of lease financing by borrowers in light of the tight credit markets. Lessors continue to cope with increased delinquencies and charge-offs and most expect this to continue into 2009," Jaschik said. Jaschik is also a member of the ELFA Board, recently elected as 2008-9 Treasurer.
"It should be no surprise that the turmoil in the financial markets has spilled over into the commercial finance sector and general economy," said ELFA President Kenneth E. Bentsen, Jr. "Even so, amidst all the bad news, the commercial equipment finance market seemed to hold up in September," said Bentsen.
About the ELFA's MLFI-25
The index is released globally at 9:30 a.m. Eastern time from Washington, DC 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, participants and a calendar of release dates 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