State of the Industry Report Shows Mixed Impact of Economic Downturn
((Many of the respondents reported the beginnings of an economic upturn in 2003 in the small ticket market (transaction size $25,000 to $250,000).
(Small ticket transactions drove new business volume in 2002, generating
37.4 percent of total new business volume. Micro ticket transactions,
while generating only five percent of new business volume, generated
impressive returns. In 2002, micro ticket (transactions size $0 to
$25,000 showed a substantial increase in new business volume (23.5
(Full Report with a separate down of charts follows this press release. editor)
Despite low interest rates, equipment leasing industry remains important
financing vehicle for capital in the U.S.
Arlington, Virginia-The Equipment Leasing and Finance
Foundation, a non-profit organization dedicated to enhancing recognition
and understanding of equipment lease financing, has released its 2003
State Of The Industry Report (SIR). Survey respondents describe mixed
effects from the economic downturn. For some sheer survival is a goal,
while other respondents report that the challenging times have provided
an opportunity to refocus their approach, streamline their operations,
and clarify their strategies leaving them poised to take maximum
advantage of the next economic up cycle. The SIR report, administered by
Financial Institutions Consulting, Inc. (FIC), reflects year-end 2002
"The SIR report shows that, despite historically low interest rates,
leasing continues to be an important financing vehicle for equipment in
the U.S.," said Lisa Levine, Executive Director, Equipment Leasing and
Finance Foundation. "Respondents maintained satisfactory levels of
profitability despite declining revenues, reduced new business volume,
and slightly increased charge-offs." Controlling costs was cited as a
main contributor to steady profitability.
Leasing continues to be the most widely used method of asset-based
financing in the U.S., accounting for approximately one-third of
external financing of total capital investment. However, leasing volume
is in direct relation to business equipment investment. Based on the
Bureau of Economic Analysis' most recent GDP estimates, the SIR states
total leasing volume for 2003 is expected to increase only slightly over
2002. The 2003 estimate for leases is $208 billion out of $668 billion
in total new business equipment investment. That figure is
up from $204 billion in equipment leases on $655 billion in new business
equipment investment for 2002. The SIR's projection for 2004 shows a
modest five percent increase over the previous year, barring new world
incidents negatively impacting any economic recovery.
The report shows results from the three leasing market segments - small
ticket comprising transactions up to $250,000, middle market comprised
of transactions from $250,000 to $5,000,000 and large ticket for
transactions over $5,000,000. The SIR also includes information by
categories of independent, captive and bank-affiliated leasing entities.
Key findings include:
* Currently, the industry faces two main challenges: current
economic conditions and the potential impact of accounting, legislative,
and regulatory changes.
* Many respondents, in 2003, particularly in the small ticket
market, are seeing the beginnings of an economic upturn.
* For the 132 Survey respondents, 2002 new business volume
declined by 4.6 percent over the previous year.
* Bank leasing companies experienced a significant drop in new
business volume with captives and independents, financial services firms
showing modest increases.
* By ticket size, micro ticket showed a substantial increase in
new business volume (23.5 percent) while the other segments experienced
* By channel, vendor and captive programs gained in importance
over the previous year, demonstrating the increasing importance of
* New business volume by equipment type shows most transportation,
construction equipment, and industrial equipment volume down over the
previous year. However, investment in medical and information technology
increased during the same period. Based on interim GDP reports,
information technology and computers may continue to show strong growth
in 2003 Transportation and industrial equipment continues to decline.
Even by the most optimistic forecasts, certain segments of the leasing
industry will continue to experience significant challenges for the next
12 to 24 months.
"More than ever, success in this industry requires focus, flexibility,
and the ability to rapidly adapt to changing environments," said Levine.
The SIR contains analysis of industry results, trends, developments and
future outlook for the equipment leasing industry. It was compiled using
information from the Equipment Leasing Association's (ELA) Survey of
Industry Activity, FIC's past client experience, in-depth personal
interviews, and independent economic data.
Charts in the story, please go here:
Here is the full report, depending on your internet connection, this may
be a long download :
About The Equipment Leasing and Finance Foundation
The Equipment Leasing and Finance Foundation is a 501c3 non-profit
organization established in 1989 by the Equipment Leasing Association of
America. The Foundation develops and promotes the body of knowledge to
enhance recognition and understanding of equipment lease financing. The
Foundation's strategic objectives are to maximize the role that
equipment leasing plays in the world economy, and to be the prime
developer and disseminator of a body of knowledge of the leasing
industry. Visit the Foundation online at