Survey Shows New Business Down at the End of 2015

Leasing, Finance leader says it'll be interesting to see how early 2016 goes for the industry with rock-bottom oil prices and higher long-term interest rates leading the way.

📅   Thu February 11, 2016 - National Edition


Cumulative new business volume for 2015 was relatively flat with 2014, rising 0.4 percent.
Cumulative new business volume for 2015 was relatively flat with 2014, rising 0.4 percent.

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 December was $12.5 billion, down 5 percent from new business volume in December 2014. Volume was up 105 percent from $6.1 billion in November. Cumulative new business volume for 2015 was relatively flat with 2014, rising 0.4 percent.

Receivables over 30 days were 1.1 percent, unchanged from the previous month and up from 0.96 percent in the same period in 2014. Charge-offs were 0.41 percent, up from 0.30 the previous month.

Credit approvals totaled 80.2 percent in December, up from 79.0 percent in November. Total headcount for equipment finance companies was up 3.5 percent year over year.

Separately, the Equipment Leasing & Finance Foundation's Monthly Confidence Index (MCI-EFI) for January is 54.0, easing from last month's index of 60.2. ELFA President and CEO Ralph Petta said, “With another strong year end, MLFI-25 participants managed to eke out positive growth for the year. However, credit losses inched up during the month, showing some softness in portfolio quality. Now that the Fed has taken a first step toward higher long-term rates and with rock-bottom low oil prices giving way to sluggish fourth quarter growth in the U.S. economy, it will be interesting to see how the equipment finance sector responds in early 2016 and throughout the winter months.”

Jud Snyder, president, BMO Harris Equipment Finance Company, said, “This month's MLFI-25 corroborates feedback we are hearing from some of our clients. December saw a shift in confidence and reflects a pause in continued capital investment in certain sectors of the economy. Turbulent world markets and declining commodity prices, especially in energy, have combined to make companies carefully consider investment in large scale expansion projects. This is partially offset by the equipment finance industry's willingness to lend [reflected by the 80.2 percent credit approval factors] and the market's continued low interest rate environment. These two factors combine to make companies that are expanding more likely to consider debt or lease financing, as opposed to using cash for their capital acquisitions.”

For more information, please visit www.elfaonline.org.