The Equipment Leasing and Finance Association’s (ELFA) Monthly Leasing and Finance Index (MLFI-25), which reports economic activity for the $518 billion equipment finance sector, showed overall new business volume for January declined by 24 percent when compared to the same period in 2009. The MLFI-25 reported month-to-month new business volume decreased by 52.1 percent from December to January, from $7.1 billion to $3.4 billion, reflecting typical end-of- year activity in December. According to supplemental data, this downturn in new business volume is attributable, in large part, to a continued decline in customer demand for financing.
Portfolio quality stabilized. After reaching a high of 5.6 percent in September 2009, MLFI-25 reported receivables over 30 days remained flat at 4.3 percent. On a year-over-year basis, receivables over 30 days increased only slightly. Charge-offs decreased to 1.68 percent from 2.08 percent in the prior month, but rose by 19.2 percent (27 basis points) when compared to January 2009.
Credit approvals increased to 71 percent in January, up from 65.2 percent in the same period in the previous year. A majority of participant companies reported that fewer transactions were submitted for approval during the month. Total headcount for equipment finance companies decreased by almost two percent in the December-January period. And, once again, the construction and trucking transportation industries lead the underperforming sectors.
“The data present a somewhat cloudy picture, as originations continue to lag and portfolio quality shows some improvement,” said ELFA interim president Ralph Petta. “We are starting to see positive signs in the amount of equipment being financed as more and more companies begin thinking about replacing tired assets and expanding their businesses.”
"Most companies remain reluctant to invest in new capital equipment, without further signs of a true economic recovery,” said Jud Snyder, President, M+I Equipment Finance Company, located in Milwaukee, WI. “Replacement capital equipment spending should provide some lift to originations during the first half of 2010, but new investment still seems to be on hold. The bright spots in the MLFI-25 data show a stabilization of portfolio quality and a return to historical levels of credit approvals. It's early, but hopefully these are trends that point to the start of a new economic growth cycle."
A related index, the Equipment Leasing & Finance Foundation's Monthly Confidence Index (MCI-EFI), for February was 60.6, an increase from January’s index of 58.7, and a new high for the index since it was inaugurated in May 2009.
The MCI-EFI is a monthly survey of equipment finance industry executive leadership that provides a qualitative assessment of both the prevailing business conditions and expectations for the future. Since the same organizations provide the data from month to month, the results constitute a consistent barometer of the industry’s confidence. For more information, visit http://www.leasefoundation.org/IndRsrcs/MCI/.
About the ELFA’s MLFI-25
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 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 MLFI-25 is a financial indicator that complements the durable goods report and other economic indexes, including the Institute for Supply Management Index, which reports economic activity in the manufacturing sector. Together with the MLFI-25 these reports provide a complete view of the status of productive assets in the U.S. economy: equipment produced, acquired and financed.
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.
ELFA MLFI-25 Participants
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
HitachiCredit America
HP Financial Services
John Deere Credit Corporation
Key Equipment Finance
Marlin Leasing Corporation
National City Commercial Corporation
RBS Asset Finance
Regions Equipment Finance
Siemens Financial Services
Susquehanna Commercial Finance Inc.
US Bancorp
Tygris Vendor Finance
Verizon Capital Corporation
Volvo Financial Services
Wells Fargo Equipment Finance
About the ELFA
The Equipment Leasing and Finance Association (ELFA) is the trade association that represents companies in the $518 billion equipment finance sector, which includes financial services companies and manufacturers engaged in financing capital goods. ELFA members are the driving force behind the growth in the commercial equipment finance market and contribute to capital formation in the U.S. and abroad. Its over 600 members include independent and captive leasing and finance companies, banks, financial services corporations, broker/packagers and investment banks, as well as manufacturers and service providers. For more information, visit www.elfaonline.org.