The Equipment Leasing and Finance Association’s (ELFA) Monthly Leasing and Finance Index (MLFI-25), which reports economic activity from 25 companies representing a cross section of the $1-trillion equipment finance sector, showed their overall new business volume for March was $8.1 billion, up 33% from new business volume in February. Volume was down 11% from $9.1 billion in March 2015. Year to date, cumulative new business volume decreased 9% compared to 2015.
Receivables over 30 days were 1.2%, down from 1.4% the previous month and up slightly from 1.18% in the same period in 2015. Charge-offs were 0.50%, up from 0.37% the previous month.
Credit approvals totaled 77.7% in March, down from 79.2% in February. Total headcount for equipment finance companies was up 1.4% year over year.
Separately, the Equipment Leasing & Finance Foundation’s Monthly Confidence Index (MCI-EFI) for April is 59.1, an increase from the March index of 51.6.
ELFA President and CEO Ralph Petta said, “Despite showing a relatively healthy increase over February originations, March new business volume continued its decelerating trajectory when compared to the same period in the prior year. Headwinds continue to tamp down a pattern of consistent growth within the equipment finance sector, as U.S. businesses are uncertain about the outlook for strong and consistent growth in the U.S. economy. Credit quality appears mixed. While the monthly delinquency data is promising, the sharp increase in losses bears careful monitoring in the months ahead.”
Tony Golobic, Chairman and Chief Executive Officer, GreatAmerica Financial Services, said, “For much of the past 12 months, GreatAmerica Financial Services has experienced a moderate increase in overall commercial equipment finance volume, which grew by 13.5% over the same period of last year. However, our March growth slowed to 5.6% over March of 2015. Our new business backlog is pointing to continued growth for the foreseeable future. Uncertainty about the Fed’s thinking about interest rates, the election, and the Great Recession resonates with many. These factors are resulting in some reluctance to invest in new equipment. There is ample supply of capital and we’re seeing increased credit appetites by some in our industry. While we have seen a modest uptick in our own delinquency and charge-offs, our portfolio credit quality continues to be strong.”
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 8 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 MLFI-25 is a time series that reflects two years of business activity for the 25 companies currently participating in the survey. The latest MLFI-25, including methodology and participants, is available at www.elfaonline.org/Data/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.
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