Capital Markets

Survey: Equipment Leasing Dove by 30% in First Quarter

But the volume of new equipment financing rose 42.4 percent from February to March, according to the Equipment Leasing and Finance Association.
David KatzApril 23, 2009

Overall new business volume in equipment leasing dropped by 30 percent in March when compared to the same month in 2008, according to the Equipment Leasing and Finance Association’s monthly index of leasing finance activity.

 At the same time, the survey showed some near-term brightness amid the gloom: new business volume increased 42.4 percent from February to March, rising from $3.3 billion to $4.7 billion. 

Over the entire first quarter of 2009, however, new business volume plummeted by 31 percent in comparison to the first quarter of 2008.  New business volume contracted by 17 percent in the fourth quarter of 2008, year over year, according to the survey. 

Until the fourth quarter of last year, the index data indicated that the recession hadn’t slowed capital equipment acquisitions, according to Bill Verhelle, chief executive officer of First American Equipment Finance, a participant in the survey. “U.S. businesses now appear to be dramatically cutting equipment acquisitions,” he said. 

The index, which is based on the experience of 26 participants in the equipment finance industry, reflects capital expenditure for the industry, according to ELFA, which defines capex as the volume of commercial equipment financed in the United States. 

Together, the companies in the index reported receivables over 30 days rose from 4.5 percent to 5.0 percent between February and March. Charge-offs increased to 2.21 percent from 1.74 percent in the prior month and more than doubled March 2008 losses. 

Forty-seven percent of participating companies said that fewer transactions were presented for approval during March. The reasons were tightening underwriting standards and lower demand, according to ELFA. Equipment finance companies showed a 0.95% decline in headcount in March.

Noting “a decided slowdown in demand for investment in capital goods,” ELFA president Kenneth Bentsen said in a press release: “The combination of slack demand and tighter underwriting standards put a damper on the U.S. equipment finance market in the first quarter, following on a decline that began in the prior quarter.”