Monthly Leasing and Finance Index September 2009

By October 28, 2009Financing

Monthly Leasing and Finance Index

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 declined by 30.9 percent when compared to the same period in 2008. For 2009, the MLFI-25 reported month-to-month new business volume increased 27.0 percent from August to September, from $3.7 billion to $4.7 billion.

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 a financial indicator that complements other relevant economic indices, including the monthly durable goods report prepared 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.

The MLFI-25 reported receivables over 30 days increased to 5.6 percent as compared to 5.0 percent in August. On a year-over-year basis, receivables over 30 days increased by 60 percent. Charge-offs increased sharply to 3.0 percent from 2.1 percent in the prior month and rose by 157.3 percent compared to September 2008. This dramatic increase is attributable in part to a significant deterioration in credit quality reported by two responding organizations. Sixty-three percent of participant companies reported that fewer transactions were submitted for approval during the month, due to tightening underwriting standards and lower demand, according to supplemental data. Credit approvals remained stable at 67.9 percent when compared to the previous month; however they declined from 72.7 percent in September 2008. Total headcount for equipment finance companies decreased 1.9 percent in the August-September period.

“We find encouraging the fact that the decrease in new business volume slowed in September after several months of steady decline,” said Equipment Leasing and Finance Association Interim President, Ralph Petta. “However, this sliver of good news contrasts with the sharp deterioration in portfolio quality illustrated by the September receivables data,” said Petta.

A related index, the Equipment Leasing & Finance Foundation’s Monthly Confidence Index, for October showed a slight increase to 54.3 compared with 53.8 in September. The majority of survey respondents believe business conditions will continue to stabilize over the next four months. For more detailed information on the Monthly Confidence Index visit www.LeaseFoundation.org

About the ELFA’s MLFI-25
The MLFI-25 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. The latest Monthly Leasing and Finance Index, including methodology and participants is available below and also athttp://www.elfaonline.org/

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.

The results of each MLFI-25 are posted on the ELFA website. ELFA is the premier source for statistics and analyses concerning the equipment finance sector. Please visit ELFA for additional information.

Participants in the ELFA MLFI-25:

  • 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
  • Hitachi Credit America
  • HP Financial Services
  • John Deere Credit Corporation
  • Key Equipment Finance
  • Marlin Leasing Corporation
  • National City Commercial Corp.
  • RBS Asset Finance
  • Regions Equipment Finance
  • Siemens Financial Services
  • Susquehanna Commercial Finance, Inc.
  • US Bancorp
  • Tygris Vendor Finance
  • Verizon Capital Corp
  • Volvo Financial Services
  • Wells Fargo Equipment Finance