Month: March 2017

The Equipment Leasing and Finance Association (ELFA) released its latest Monthly Leasing and Finance Index (MLFI-25) report, showcasing economic activity within the equipment finance sector. The report reveals that February’s new business volume was $5.9 billion, representing a 3% year-over-year decline compared to February 2016. While this dip may raise concerns for some stakeholders, it is important to assess the overall economic landscape and understand the contributing factors behind these figures. In this blog post, we’ll delve deeper into the data, examine the trends, and explore the potential implications for the equipment leasing and finance industry.

Understanding the ELFA Monthly Leasing and Finance Index (MLFI-25):

The MLFI-25 serves as a key financial indicator within the equipment leasing and finance industry. Compiled from data provided by 25 companies representing a diverse cross-section of the sector, it offers valuable insights into the overall health and trends of the market. By analyzing new business volumes, credit quality, and other metrics, stakeholders can gain a better understanding of the industry’s current state and its potential future trajectory.

February’s New Business Volume Analysis:

According to the MLFI-25 report, February’s new business volume totaled $5.9 billion, marking a 3% decrease from the same period in the previous year. Additionally, the volume saw a month-to-month decline of 5% compared to January’s figure of $6.2 billion. While this decline may seem concerning, it is crucial to consider the broader economic context that could be influencing these results.

Economic Factors Influencing the Equipment Leasing and Finance Industry:

Several economic factors can influence the equipment leasing and finance industry’s performance. One of the primary indicators is consumer and business confidence. When consumers and businesses are optimistic about the future, they are more likely to invest in new equipment and technology. Conversely, uncertainty or economic downturns may lead to decreased demand for equipment leasing and financing services.

Moreover, interest rates play a crucial role in shaping the industry’s dynamics. The Federal Reserve’s decision to raise its short-term interest rate target in March could have implications for the equipment finance sector. Higher interest rates might lead to increased borrowing costs for businesses, potentially impacting their equipment acquisition decisions.

Credit Quality and Approvals:

The report also sheds light on credit quality and approval rates within the industry. Receivables over 30 days decreased to 1.50% from the previous month’s 1.70% but showed a slight increase from 1.40% compared to the same period in 2016. This mixed credit quality indicates that businesses are managing their financial obligations reasonably well, despite some challenges.

Credit approvals, on the other hand, declined slightly to 74.8% in February from January’s figure of 75.4%. While this might indicate a more cautious approach by lenders, it’s crucial to remember that a credit approval rate above 70% is generally considered healthy for the industry.

Employment Trends in the Equipment Finance Sector:

Total headcount for equipment finance companies experienced a significant increase of 18.6% year over year. This spike is primarily attributed to continued acquisition activity at an MLFI reporting company. The growth in employment indicates a positive outlook for the industry, as companies are expanding their operations and increasing their workforce to meet growing demand.

Confidence in the Equipment Leasing and Finance Sector:

The Equipment Leasing & Finance Foundation’s Monthly Confidence Index for March stood at 71.1, slightly down from February’s index of 72.2 but still among the highest levels of the last two years. This confidence level indicates that industry professionals remain positive about the sector’s future prospects, despite the challenges faced in the past year.

February’s MLFI-25 report reflects a moderate decline in new business volume within the equipment leasing and finance industry. While this may raise some concerns, it’s essential to consider the broader economic context, including consumer and business confidence, interest rates, and overall market conditions. With credit quality holding steady and a positive outlook from industry professionals, there are reasons to be cautiously optimistic about the sector’s growth in the coming months. As the industry adapts to changing economic conditions, stakeholders must stay vigilant and continue monitoring trends to make informed decisions in this dynamic market.

The Equipment Leasing and Finance Association (ELFA) conducted a survey to identify the hottest equipment sectors. Based on responses from asset managers and consultants, the study revealed valuable insights into industry perceptions of 15 equipment markets. The results showed a mix of optimism and concern among equipment managers and leasing companies. While some sectors exhibited positive outlooks, others faced potential threats, such as a slowing economy, oversupply, over-regulation, and economic instability.

One sector that stood out for the fourth consecutive year was construction equipment, followed closely by medical, machine tools, high-tech/computer, plastics, and trucks/trailers. We’ll explore the reasons behind their rankings and analyze their potential growth in the secondary market.

Construction Equipment:
Construction equipment emerged as the undisputed leader in the survey for the fourth consecutive year. The sector’s positive outlook can be attributed to the improving health of the economy and low interest rates. With proposed national infrastructure projects on the horizon, construction equipment sales are expected to remain robust.

However, the secondary market for used construction equipment faced challenges due to sales in the primary market, weak global trade, and a strong dollar discouraging exports. Despite this, the construction industry remains optimistic about growth prospects, buoyed by the potential infrastructure investments.

Medical Equipment:
The medical equipment sector secured the second spot in the ELFA survey, reflecting a better understanding of the Affordable Care Act’s impact on hospitals and clinics. The potential for an ACA overhaul also influenced the industry’s rankings.

A significant factor driving the preference for leased medical equipment is the increasing healthcare needs of the baby boomer generation. This demographic shift has bolstered the demand for medical equipment leasing. However, potential Deductible Reimbursement Account (DRA) reimbursement cuts and industry-specific rules pose challenges to the new equipment market.

Nevertheless, the medical equipment secondary market is robust, and the refurbished equipment segment is projected to witness substantial growth in the coming years.

High-Tech/Computers:
The high-tech/computers sector secured the fourth position despite operating on narrow margins. The industry benefits from a sizable secondary market, compensating for declining global computer sales.

The shift in consumer preferences towards phablets and wearables impacted primary market PC sales. However, this change opens up positive opportunities for the secondary market.

Plastics Equipment:
Tying for fifth place, the plastics equipment sector experienced a remarkable turnaround across all categories. The automotive industry’s demand for high-capacity IMMs and smaller capacity plastic equipment used by auto parts suppliers contributed significantly to this growth.

Sales of new injection molding machines have risen steadily over the past seven years, while used plastic injection molding machines’ prices have surged by 20% to 50% during the same period.

However, the PET bottling segment faced declines in used blow molding equipment prices due to technological advancements and industry consolidation.

Trucks/Trailers:
The trucks/trailers sector also tied for fifth place, with a positive outlook driven by low fuel prices and interest rates. While new truck sales dipped, used truck and trailer sales remained steady.

Competition from the rail industry played a role in the decline of new truck sales. Nevertheless, new trailer shipments set a record in 2006, indicating the sector’s strength.

The ELFA survey offered valuable insights into the hottest equipment sectors for 2017. Construction equipment continued its reign at the top, supported by a flourishing economy and potential infrastructure projects. The medical equipment sector held the second spot, driven by the aging baby boomer population’s healthcare needs.

Machine tools ranked third, benefiting from strong domestic automotive and oil exploration industries. High-tech/computers and plastics equipment followed closely, each offering unique opportunities and challenges in their respective markets. The trucks/trailers sector, supported by low fuel prices and interest rates, also stood out among the top equipment sectors.

While the survey highlighted areas of optimism, it also pointed to potential threats and challenges in the secondary market. With a balanced understanding of these factors, businesses in these sectors can position themselves for success in the dynamic world of equipment leasing and finance.

The Equipment Leasing and Finance Association (ELFA) has been at the forefront of promoting industry development, advocating for the equipment finance sector, and providing valuable resources for industry professionals. However, in recent years, ELFA noticed a growing concern regarding the aging workforce within the industry. To address this issue, ELFA introduced innovative programs aimed at attracting new, young talent and fostering strong connections with emerging employees from member companies. In this blog post, we will delve into ELFA’s initiatives and hear from ELFA’s President and CEO, Ralph Petta, along with members Scott Thacker and Nathan Gibbons, about their experiences with these programs and their outcomes.

The Graying of the Industry?

While the notion of the equipment finance industry graying might be anecdotal, ELFA considers attracting young talent and raising awareness as pivotal aspects of its mission. The industry, like many others, is facing the impending retirement of baby boomers, which highlights the need to welcome the next generation of professionals, specifically millennials, into the fold. Additionally, the low personnel turnover in the industry contributes to the perception of graying, as many individuals find endless opportunities within the sector and tend to stay for the long term.

The Guest Lecture Program: Bridging Industry and Education

In 2012, the ELFA’s Financial Institutions Business Council Steering Committee recognized the necessity for a resource that could educate others about the equipment leasing and finance industry. This realization led to the creation of the Guest Lecture Program, which encourages member company leaders to establish relationships with educational institutions by conducting on-site presentations on the industry’s overview. Members use a standardized slide deck to present what the industry entails, how it operates, and its significance for businesses and municipalities.

The Emerging Talent Advisory Council (ETAC): Nurturing Up-and-Coming Talent

Complementing the Guest Lecture Program, ELFA established the Emerging Talent Advisory Council (ETAC) in 2014. This dedicated focus group works to assess how the association can engage and support industry employees in the early stages of their careers. By providing events and networking opportunities, ETAC aims to foster strong connections between young talent and the equipment finance industry.

In the Field: Success Stories

Many ELFA members have actively participated in the Guest Lecture Program and ETAC, creating positive outcomes for both the industry and the students involved. For instance, Scott Thacker, CEO of Ivory Consulting and ELFF Vice Chairman, presented a guest lecture at the Wharton School’s San Francisco campus. By customizing the presentation to highlight technology and entrepreneurial opportunities within the industry, Thacker engaged the audience effectively.

Nathan Gibbons, Vice President at First American Equipment Finance and a member of ETAC, also had a fruitful experience. He delivered several lectures, emphasizing the personal connections he developed with the industry. By sharing his journey and passion for the field, Gibbons piqued students’ interest and raised awareness about equipment finance as a viable career option.

The Effectiveness of ELFA’s Initiatives

As the Guest Lecture Program and ETAC are still relatively young initiatives, their tangible impact is continuously evolving. ELFA President and CEO Ralph Petta remains cautiously optimistic about the programs’ success, given the positive enthusiasm and interest they have generated so far. Going forward, ELFF, the association’s research affiliate, will oversee the Guest Lecture Program, further strengthening its connection with the academic community.

Nathan Gibbons views the effectiveness of the programs beyond the number of resumes submitted. He believes that the initiatives foster meaningful relationships between students, educators, and the industry, providing students with more career options and enhancing classroom experiences. Additionally, he highlights that the Guest Lecture Program has exposed exceptionally talented individuals to the industry who might not have discovered it otherwise.

Why They Do It: The Drive to Attract New Talent

The members who participate in the Guest Lecture Program and ETAC have strong motivations for their involvement. For ELFF Vice Chairman Scott Thacker, it is about giving back to the industry and helping to develop the next generation of professionals, just as he was mentored during his early days. Similarly, for Nathan Gibbons, it is a sense of personal responsibility to give back to an industry that has provided him with countless opportunities.

ELFA’s proactive approach to attracting new talent and combatting the perceived “graying of the industry” is commendable. Through the Guest Lecture Program and ETAC, ELFA has successfully engaged with academic institutions and emerging professionals, providing invaluable insights into the world of equipment finance. As the industry continues to evolve, these programs will play a vital role in shaping the future workforce and ensuring the continued success of the equipment leasing and finance sector.

The global leasing industry has reached a remarkable milestone, with overall annual volumes surpassing $1 trillion in 2016. According to the 20th annual Global Leasing Report by White Clarke Group, the leasing sector has rebounded strongly from the aftermath of the great recession, showcasing growth that outpaces the overall economy. This marks the fifth consecutive year of expansion for the industry since the global economic crisis. The report highlights the dominance of North America in the leasing market, the impressive performance of Europe driven by auto finance, and the rapid rise of China in the Asian region.

Global Leasing Industry Reaches $1 Trillion Milestone
The leasing industry has proven its resilience by reaching a significant milestone of $1 trillion in annual volumes in 2016. After enduring the impact of the great recession, the sector has steadily grown for five consecutive years, demonstrating its remarkable recovery and robustness. The Global Leasing Report released by White Clarke Group presents compelling evidence of the industry’s strength, outpacing the growth of the overall economy.

The surge in the leasing market can be attributed to several factors. First and foremost, businesses and consumers are increasingly favoring leasing over purchasing due to the many benefits it offers. Leasing allows companies to access state-of-the-art equipment and technology without significant upfront costs, while individuals can enjoy the latest products without the burden of ownership. Additionally, leasing agreements often come with attractive tax incentives, making it an appealing choice for both companies and individuals.

North America Leads the Global Leasing Market
North America continues to dominate the global leasing industry, solidifying its position as the largest leasing region worldwide. The United States, in particular, stands out as the world’s largest leasing market, experiencing double-digit growth.

The strong performance of the North American leasing market can be attributed to various factors. The region’s thriving business environment, technological advancements, and favorable regulatory landscape have all contributed to the growth of the industry. Moreover, companies in North America have recognized the strategic advantages of leasing, allowing them to conserve capital, reduce risks, and improve overall operational efficiency.

Despite the challenges posed by the recent economic events, such as Brexit and the election of Donald Trump as U.S. president, the North American leasing industry has remained resilient. While there might be some short-term volatility in the global foreign exchange and stock markets, the overall outlook for the leasing sector remains positive.

Europe’s Promising Leasing Market Driven by Auto Finance
Europe’s leasing market has shown considerable progress in recent years, with two of its largest and most mature countries, the UK and Germany, leading the way. The UK, in particular, achieved a notable 14% increase in leasing volumes, signaling a growing preference for leasing solutions.

The growth of the European leasing industry can be partly attributed to the flourishing auto finance sector. As more consumers and businesses opt for leasing vehicles instead of purchasing them outright, the demand for auto finance has surged. Leasing provides flexibility, affordability, and the opportunity to drive the latest models without the long-term commitment of ownership. This trend has contributed significantly to the region’s leasing market growth.

Asia Emerges as a Key Player in the Global Leasing Market
Asia has emerged as a powerhouse in the global leasing market, showing the fastest growth among all regions. China, in particular, has played a crucial role in driving this expansion, with its leasing market expanding by more than 25% in just one year.

The growth of Asia’s leasing industry can be attributed to various factors. First and foremost, the region’s focus on infrastructure development and manufacturing has spurred demand for leasing equipment and machinery. As businesses seek cost-effective ways to acquire essential assets, leasing has become a viable solution.

Furthermore, the flourishing car market in Asia has contributed significantly to the region’s leasing industry growth. With a resilient car market, businesses and individuals have turned to leasing as an attractive option for obtaining vehicles. Leasing offers them the flexibility to upgrade to newer models and access the latest automotive technologies.

The global leasing industry has experienced substantial growth for five consecutive years, surpassing the $1 trillion milestone in annual volumes. North America remains at the forefront of the industry, with the United States leading as the largest leasing market. Europe has also shown significant progress, particularly in the UK and Germany, where auto finance has been a driving force. Meanwhile, Asia’s leasing market, spearheaded by China, has exhibited rapid expansion due to infrastructure development and a resilient car market. Despite potential economic uncertainties, the leasing sector continues to thrive, offering businesses and consumers flexible and cost-effective solutions for acquiring essential assets.