January 2023 Leasing and Finance Index

Tradewinds

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 January was $8.8 billion, up 6 percent year-over-year from new business volume in January 2022. Volume was down 32 percent month-to-month from $12.9 billion in December following the typical end-of-quarter, end-of-year spike in new business activity.

Receivables over 30 days were 1.9 percent, up from 1.8 percent the previous month and up from 1.8 percent in the same period in 2022. Charge-offs were 0.34 percent, up from 0.26 percent the previous month and up from 0.17 percent in the year-earlier period.

Credit approvals totaled 75.1, down from 76.6 percent in December. Total headcount for equipment finance companies was down 4.3 percent year-over-year.

Separately, the Equipment Leasing & Finance Foundation’s Monthly Confidence Index (MCI-EFI) in February is 51.8, an increase from the January index of 48.5.
ELFA President and CEO Ralph Petta said, “The year gets off to a strong start with healthy new business volume in January. Business demand for equipment financing continues unabated despite uncertain and, in some cases, conflicting economic signals: inflationary pressures, rising interest rates, a hot labor market, and easing supply chain disruptions. Credit quality bears watching, as delinquencies and charge-offs creep up from historic lows.”

Nicholas Small, VP, Finance Shared Services, Cisco Systems Capital Corporation, said, “Although new business volume and portfolio performance continue to be strong, uncertainty surrounding inflation and interest rates persists. This presents a bit of a dichotomy in that we see the confidence index increasing despite slight upward pressure on delinquencies and losses. This will drive continued discipline within credit and portfolio management until we see more stability and predictability in key economic indicators. In terms of new business, these same economic pressures will continue to drive strong demand for financial products in our industry. The reduction in headcount is reflective of the tight employment market, versus workforce demand, and we can expect to see this trend improve."

About ELFA’s MLFI-25
The MLFI-25 is the only near-real-time 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/knowledge-hub/mlfi-25-monthly-leasing-and-finance-index.

The MLFI-25 is part of the Knowledge Hub, the source for business intelligence in the equipment finance industry. Visit the hub at www.elfaonline.org/KnowledgeHub.

MLFI-25 Methodology
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.

About ELFA
The Equipment Leasing and Finance Association (ELFA) is the trade association that represents companies in the $1 trillion 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 580 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. ELFA has been equipping business for success for more than 60 years. For more information, please visit www.elfaonline.org.

ELFA is the premier source for statistics and analyses concerning the equipment finance sector. Please visit www.elfaonline.org/knowledge-hub/knowledge-hub-home for additional information.