The Equipment Leasing and Finance Association’s Monthly Leasing and Finance Index (MLFI-25), which reports economic activity for the $600 billion equipment finance sector, showed overall new business volume for March decreased 10.3% when compared to March 2007.
The MLFI-25 also showed 2008 originations increased significantly from February ($5.4 billion) to $7.0 billion in March. However, the increase was anticipated due to the quarter-ending cyclicality of the equipment finance business.
Portfolio quality declined in March. Receivables aging in the past due category over 30 days (3.3%) have shown an increase in each of the last six months. March charge-offs increased over the previous month (from .72% to .83%), reaching their highest levels since January 2006. Credit approval ratios (73.6%) declined when compared to February 2008 (75.5%). Total headcount remained flat in March compared to the previous month.
“The MLFI-25 indicates credit approval rates are down and delinquencies are up slightly after a period of exemplary performance and we are now seeing slower volume which indicates caution,” said David Merrill, president of Fifth Third Leasing Company in Cincinnati, Ohio. Fifth Third Leasing Company is the newest participant in the MLFI-25. “The downturn is not widespread, however. Trucking, construction-related sectors, and rail have been most affected.”
“Clearly the deterioration of the housing sector and credit crisis have had some effect on corporate capital investment appetite and balance sheets,” said Kenneth Bentsen, Jr, president of the ELFA. “Overall credit quality over the last two plus years has been extraordinary and some back up should be expected. And it is likely that the commercial finance sector is feeling the effects of the credit crunch, putting downward pressure on new originations.”