ELFA - Equipment Leasing and Finance Association - Equipping Business for Success

Monthly Leasing and Finance Index August 2007

Aug 1, 2007, 18:39 PM

The Equipment Leasing and Finance Association's (ELFA) Monthly Leasing and Finance Index (MLFI-25), which reports equipment finance activity, showed that overall new business volume for August increased by 6.1 percent compared to the same month in 2006. According to year-to-date cumulative totals, new business volume for January to August 2007 was 9.4 percent higher when comparing the same period in 2006.

The MLFI-25 reported new business volume for August totaled $6.9 billion for new commercial equipment leases and loans, compared to $6.7 billion in July. New business volume for August 2006 totaled $6.5 billion.

Portfolio quality showed some softening in August. While current receivables (less than 30 days) remained virtually unchanged from July of this year, those in the 61-90 day and over 90-day buckets increased when comparing both the prior month and year-earlier month's data. Losses were up as well, when comparing both periods. Credit approval ratios remained the same compared to August 2006 data, but increased dramatically from the prior month.

Total headcount was slightly higher in the July-August period, but compared to the earlier-year month, showed a 9 percent decline.

Michael J. Rizzo, President of US Bancorp Business Equipment Finance Group in Marshall, Minnesota, said, "It is very encouraging that, despite a softening economy and the negative implications of the sub-prime mortgage fallout, demand for equipment financing remains very strong relative to last year. Given the Federal Reserve's recent rate decrease, the remaining four months of 2007 should continue to reflect this underlying strength." Mr. Rizzo, whose firm is an MLFI-25 survey participant, said, "It is not surprising that portfolio quality is deteriorating slightly since most lessors have enjoyed historically low delinquency and bad debt for the past three years. The key to continued success in this market is to pay increased attention to portfolio management and to recognize inherent risk when pricing transactions."

"The August MLFI-25 data indicate that the commercial sector of the economy remained on track during August and credit remained available for both lenders and borrowers in the equipment finance market," said ELFA president Kenneth E. Bentsen, Jr. "While we witnessed some softening of credit quality, business capital investment remained strong, reflecting the underlying economic fundamentals."

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 leasing and 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. Charts and graphs are available for the media upon request; please contact Diane Helyne Zyats at ELFA at dzyats@elfaonline.org.

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
  • LaSalle National Leasing Corporation
  • 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

MLFI-25 New Business Volume
(Year Over Year Comparison)

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Aging of Receivables:

Month Year Less than 30 days 31-60 days 61-90 days Over 90 days
January 2006 98.1% 0.9% 0.3% 0.7%
  2007 97.8% 1.0% 0.3% 0.8%
February 2006 97.8% 1.0% 0.4% 0.8%
  2007 97.5% 1.3% 0.3% 0.9%
March 2006 97.8% 1.0% 0.3% 0.7%
  2007 97.5% 1.0% 0.5% 1.0%
April 2006 98.0% 0.9% 0.3% 0.8%
  2007 97.4% 1.0% 0.4% 1.2%
May 2006 98.0% 1.0% 0.3% 0.7%
  2007 97.5% 1.1% 0.4% 1.0%
June 2006 98.0% 0.8% 0.4% 1.0%
  2007 97.6% 1.0% 0.4% 1.0%
July 2006 97.8% 0.9% 0.3% 0.9%
  2007 96.8% 1.8% 0.4% 1.0%
August 2006 97.8% 1.0% 0.4% 1.1%
  2007 96.7% 0.9% 1.0% 1.4%
September 2006 97.6% 0.9% 0.5% 0.9%
October 2006 97.7% 0.9% 0.3% 1.1%
November 2006 97.6% 1.0% 0.3% 1.1%
December 2006 98.1% 0.8% 0.3% 0.7%

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Percentage of your net investment at risk
for receivables over 90 days
Net Investment at Risk

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Average Losses (Charge-offs) as a % of net receivables
(Year Over Year Comparison)
Annualized Average Loss

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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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