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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 percent) (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 performance.
"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 declines.
* By channel, vendor and captive programs gained
in importance over
the previous year, demonstrating the increasing importance of Point-of-Sale
financing. * 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: http://two.leasingnews.org/loose_files/2003%20SOI%20Charts_files/frame.htm Here is the full report, depending on your internet
connection, this may be
a long download : http://two.leasingnews.org/temporary/2003%20State%20of%20the%20Industry.doc 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 |
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