State of the Industry Report2000Prepared by:Financial Institutions Consulting, Inc.October 2000

CONTENTSPAGEPreface3Introduction5Executive Summary6Macroeconomics7Equipment Leasing Industry Overview8Lessor ors18Market Segment Profitability:19Large20Middle Market23Small24Micro27Industry Challenges28Access to Funding28New Delivery Channels29Operational Efficiency30Consolidation Activity31Employee Acquisition32Regulation and Taxation33A Path to Continued Success342

PrefaceThe Equipment Leasing and Finance Foundation focuses on future trends and their impacton the industry. To get beyond near-term performance numbers for the second year, theFoundation, selected Financial Institutions Consulting (FIC) to prepare its 2000 State ofthe Industry Report.FIC is a management consulting firm with extensive experience in banking andcommercial finance.The FIC methodology for this analysis incorporates statistical data with in-depth personalinterviews. Both FIC and the Foundation wanted to take advantage of the valuable humancapital the industry has to offer. Therefore, the Report incorporates the Equipment LeasingAssociation’s (ELA) 2000 Survey of Industry Activity (SIA) that tracks 1999 activity, FICproprietary research and analysis as well as perspectives from industry experts. To acquirethe industry perspectives, FIC recently conducted in-depth interviews with 16 industryexperts, representing a cross-section of the major lessor types and ticket sizes, as well asvendors to the industry.Our in-depth interviews focused on recent performance and the critical challenges facingthe industry. The interviews emphasized assessing the implications of current challengeson the future path required for success. The individuals who lent their time and shared theiropinions include:Irv BeimlerDavid J. ConnollyEdward DahlkaRaymond A. JamesCharles DugganDaniel LarsonCharles LeeMatthew NicholasAnthony PacchianoJohn ParisRichard J. RemikerThomas R. UehlingMark WaltersRobert M. WaxDavid S. WienerEdward S. YocumWe thank these individuals for their generous commitment of time and candid insights intothe intricacies of the leasing industry. Throughout this monograph, we include directquotations from these interviews; however, to preserve confidentiality, we present quoteson an anonymous basis.The lessor types analyzed are classified by the SIA as: captive leasing companies,independent lessors, and bank lessors. Financial advisor and other lessor types comprisedonly 5 percent of the pool of SIA respondents; their individual responses have not beenincluded in this Report. Financial advisors and other lessor types are included in theaverages calculated for the SIA and this Report. Additionally, the survey includes vendorfinance as a lessor activity.3

The ELA defines captive leasing companies as the finance subsidiaries of dealer ormanufacturing companies. Independent lessors are typically finance companies offeringleases directly to businesses and not affiliated with any particular manufacturer or dealer.A vendor is the seller or dealer of equipment to be leased.Lease size segmentation, which was also captured in the SIA, divides into the followingticket sizes: micro ticket, up to 25,000; small ticket, from 25,000 to 250,000; middlemarket from 250,000 to 5 million; and large ticket, over 5 million.Our Report begins with an overview of the leasing industry’s recent overall performanceand then discusses performance by type of lessor and ticket segment. The report goes onto focus on the key issues that senior managers are now addressing.Finally, as management consultants to the leasing industry, we conclude this Report byproviding readers with our firm’s brief perspective on how the industry might address it’schallenges and remain a formidable component of the overall corporate financing industry.Charles B. WendelPresidentFinancial Institutions Consulting, Inc.475 Fifth AvenueNew York, NY 100174

IntroductionThe equipment leasing industry remains solid while also finding itself in a challenging andchanging position. Asshown in Figures 1 and 2,growth and profitabilityhave been strong: 17percent year over yearSIA and Total U.S. Leasing Industry Newgrowth, 14.9 percentBusiness Dollar Volume Growth RatesReturn on Equity (ROE)and 1.5 percent Return on20%Assets (ROA) for fiscal17%year 1999. However, our13%11%interviews indicate thatthe market is showingsigns of reaching acyclical peak; the1997-19981998-1999industry expects growthSIA Total U.S. Leasing Industryto continue but not at thesame high rates; manybelieve that marginFigure 1pressures will also impactprofitability.Source: ELA Survey of Industry Activity Report 1999 -2000Consolidation, proliferation of efficient delivery channels, and a general tightening offunding threaten to take their toll on traditional lessors. The general economic uncertaintypervading the industryexacerbates thesechallenges.Key Financial Ratios18.1%17.5%14.9%12.5%1.5%1.4%1998Pre-tax Income to Total Revenue1999ROEROASource: ELA Survey of Industry Activity Report 1999-2000Figure 25In an EquipmentLeasing Association(ELA) “Quick Poll”taken in August 2000,151 respondents saidthat two wordsdominate their currentbusiness plans:“growth” (77 percent)and “profit” (74percent). Taking thecurrent environmentinto consideration, itwill require a high levelof proactive effort and

commitment going forward to achieve the industry’s demanding growth and profitexpectations. The industry must ask itself a fundamental question: How can it maneuverthrough an increasingly competitive and rapidly changing business environment andcontinue to grow its markets while remaining profitable?This Report will examine the current state relying on the most recently available industrystatistics of the leasing industry, focusing on new business volume, profitability, andproductivity. Additionally, we will segment our analysis by type of lessor and ticket size.This Report will focus, first, on evaluating current performance and then discuss ongoingchallenges and a possible approach for the industry in the future.Executive SummaryThanks in part to a strong December 1999 finish, total new business dollar volume for theindustry grew byapproximately 13percent over 1998 to 234 billion (Figure3). This figureTotal Domestic Business Fixed Investment and LeaseFinancing Volumereflects only leases( 's in billions)made for traditionalBusiness Fixed Investment in Computers & Equipment* (BFI)business durableBusiness Leasing Volume 882equipment, excluding 820 738software, and 691includes the entiremarket. The SIA’s 280 260 234 207reported growth citedin Figure 1 reflectsonly those lessors199819992000**2001**participating in thesurvey. For 1999,10% CAGR*** - Lease Financing Volume8% CAGR*** - BFI in computersbusiness softwareSource: ELA, FIC Analysisand equipment* Does not include softwarepurchases totaled** EstimatesFigure 3***Compounded Annual Growth Rate 180 billion.Assuming a 30percent average leasing penetration rate applied to software as well as equipment, thiswould add 54 billion to the 1999 industry volume total.New business dollar volume appears strong. Business fixed investment in equipment andsoftware is growing at an annualized rate of 13.8 percent over 1999. Software andcomputers drive the growth with a 23.2 percent year on year increase. Business fixedinvestment in equipment sustains a more moderate 11.2 percent growth to 820 billion. Atyear-end 2000, the leasing industry will have generated approximately 260 billion inequipment leasing volume and an additional 50- 60 billion in software related leases.6

Figure 4 illustrates FIC’s estimates of the total 2000 market by ticket segment. However,with increased economic uncertainty on the rise, many leasing executives project that 2001new business volume growth will decline. The overall investment in equipment bybusinesses drives theleasing industry. Inrecent years, doubledigit increases inequipment investment2000 Projected Total New Business Volume by Ticket Segmenthas contributed to rapid( 's in Billions)growth in the leasingindustry. However, 18.2many lessors project7% 46.8that growth will slow to18% 104.040%less than 10 percent for2001. Given that35%estimate, many lessors 91.0interviewed expect2001 new businessMicroSmall Middle MarketLargevolume to be 280billion, a 7 percentincrease.Source: ELA Survey of Industry Activity Report 1999 -2000, FIC analysisBoth ticket size andtype of lessor appear to have different profit dynamics, with the clear advantage going tothe lessor with the most efficient funding resources. In general, we have found that largeand small ticket markets are both very profitable with middle market being less so.The leasing industry faces challenges on several fronts. New channels threaten thetraditional way of conducting business. Merger and acquisition activity has ledconsolidation in the market and has created pricing pressure for the remaining players.The tight labor market continues to be a problem for the industry with high human capitalcosts eating away narrowing margins. And, lastly, the cost of funds continues to increasewith rising interest rates and cooling capital markets threatening strong earnings.MacroeconomicsOver the past six years the United States gross domestic product (GDP) has expanded bymore than four percent annually. Double-digit increases in the demand for equipment andsoftware have also occurred. Interest rates have been at their lowest in nearly two decades.However, many expect the positive macroeconomic environment to change.Attempts by the Federal Reserve Board (FRB) to tame inflation by slowing the growth ofthe economy appear to be working. Interest rates have increased over the past year, and atthe time this document is being written, some expect that the FRB will increase rates byanother 25 basis points after the November 2000 elections. With these factors taken intoaccount, the Mortgage Brokers Association forecasts the GDP to grow by approximately7Figure 4

3.5 percent in 2001, compared to the nearly 5 percent growth in 2000 (Figure 5). TheyLeasing Industry Growth %4%4%2001(Proj.)Gross Domestic %Business Investment Equipment & SoftwareFigure 5Source: BEA. MBAA. FIC.expect business fixed investment growth to slow to less than 8 percent for 2001, comparedwith 13.8 percent (annualized) for the third quarter of 2000.Equipment Leasing Industry OverviewToday, businesses face a myriad of financing options. With the total financing market for2000 estimated to be approximately 1 trillion, leasing has become an increasingly popularchoice forseveralreasons,includingconveniencePrimary Leasing Decision Driversand flexibility,Ease,Dollar ValueConvenienceincreased cash17%13%flow, taxbenefits, andopportunity toMaintenanceOptions, Costtransfer the13%cost ofCash Flow35%upgradingTaxesequipment to13%the lessorTechnology9%(Figure 6).According toFigure 6an interviewee,Source: ELA8

“more favorable terms, growth in technology investment, and improved cash flow drivethe customer to the industry. The challenge centers on who can offer the best added valueto win the deal. It is a very competitive market.”Growth and profitability in the leasing industry vary both by type of lessor and by ticketsegment. Bank lessors reported 22.5 percent growth, the highest rate in 1999. Given theirleverageadvantage, theydominate ROEwith an average15.4 percent.1998-1999 New Business Volume Growth ByCaptives reportLessor Typethe lowest 199922.5%growth, 3.120.1%percent (Figure7). On the otherhand, captivesmaintain an ROAadvantage, 2percent.3.1%Companysubsidized cost offunds orBankCaptiveIndependentoperationalsupport mayFigure 7Source: ELA Survey of Industry Activity Report 1999 -2000positively impacta captives’performance number.From a ticket segment growth perspective, large ticket dominated in both 1998 and 1999.Both the micro and large ticket segments outperform the small and middle marketsegments in ROE and ROA ratios. Interestingly, the middle market segment captures 44percent of all new leasing volume but generates the lowest average ROA, ROE and pre-taxrevenue.Lessor profitabilityOverall, ROE and ROA was strong. ROE increased from 12.5 percent in 1998 to 14.9percent in 1999 (See Figure 2). ROA and pre-tax income to total revenue also increasedfrom 1.4 percent and 17.5 percent, respectively, in 1998 to 1.5 percent and 18.1 percent,respectively, in 1999.Although price competition and consolidation continued in1999, returns exceeded the prioryear. Among specific lessor types:9

-Banks were the most profitable segment, reporting a 15.4 percent ROE and a strongpre-tax income to total revenue of 20.8 percent (Figure 8). Driving bank lessorsuccess, in part, is a low direct cost structure, existing customer relationships, andlower funding costs than other lessor types.1999 Profitablity Ratios by Lessor Type12.6%Pre-tax Income 0%1.2%BankCaptiveFigure 8Source: ELA Survey of Industry Activity Report 1999 -2000--IndependentCaptive lessors command an ROA advantage over other lessors with a 2.0 percentratio. This is an increase of 20 basis points over captive lessors reporting in 1998.Captives also drive the highest level of pre-tax income to total revenue at 22.1 percent.Both a low origination cost structure and a “captive” customer audience enable highreturns.Independents faced the greatest industry challenges and returned the lowestprofitability ratios. Both ROE and pre-tax income to total revenue were lowest amongall lessor types at 14.0 percent and 12.6 percent, respectively. Threats to funding,increased competition, and higher costs drove ratios lower than other lessor types.BanksLeasing activities have gained more prominence with banks with their growth and earningsimpact receiving more attention. Growth rates are well above the industry average and formost banks funding is not an issue. Deposits held in customer accounts make access tocapital for the leasing subsidiary secure and cost effective. If debt or equity funding isnecessary, the bank lessor can rely on the financial strength of its parent to obtain favorablerates. Several bank leasing executives revealed that their parent companies realize that theleasing subsidiaries often have stronger profitability measures than more traditional10

lending business lines. As a result, banks continue directing capital to their leasingoperations to support growth strategies.Bank-owned lessors see customer relationship as a major competitive advantage. Manybank lessors feel that this advantage does not result in a pricing premium but insteadenables bank lessors to win high credit quality business. Where once it was presumed thatthe only relationship a leasing company had to its existing customers was through repeatbusiness, now a bank operated lessor has a potential relationship with its parent’scustomers as well.Some bank lessorsbelieve that manycustomers are morecomfortable obtaining aTotal Revenue as a Percentage of Total Assetslease from their bank,by Lessor Type1999since they have a21.3%certain inherent trust inthe banking institution.The banks’ other13.9%business lines are alsoaware of the leasing8.3%operation andsometimes – althoughnot frequently enough Bank Captive Independentpromote it tocustomers.The most successfulSource: ELA Survey of Industry Activity Report 1999 -2000, FIC analysisbank leasing operationis connected to overallcorporate objectives, creating synergies with the existing banking relationships, thuscreating a major challenge for independents. For example, at one major bank, 35 to 40percent of all leasing customers overlap with traditional banking customers.SIA Bank respondents reported 22.5 percent growth in 1999. Median bank leasingcompany growth for the same period was 28 percent. Bank leasing companies report anaverage ROA of 1.2 percent, the lowest of all lessor types. Bank ROA is low in partbecause they generate lower revenue relative to assets than other lessor types (Figure 9).Bank lessors describe their propensity to take high credit quality customers as well asrelationship-based pricing as possible reasons for the low ratio.At 15.4 percent, bank ROE is the strongest among all lessor types. This is not surprising asbanks also report the highest leverage, 12.2 percent. Using interest expense to net earningassets, banks have a low ratio of 4.11 percent compared to independents with the high of5.7 percent. Furthermore, the total expenses net of interest, depreciation, and provision tototal revenue is 27.5 percent for bank lessors versus 40 percent for independent lessors.This ratio indicates a lower bank lessor operating cost structure (Figure 10).11Figure 9

Operating Expenses* as a Percentage of Total Revenueby Lessor e: ELA Survey of Industry Activity Report 1999 -2000, FIC Analysis*Operating expenses include 2000 SIA income statement categorie s: Sales and Marketing, Operating, and OtherFigure 10Some non bank lessors believe the reason why they generate stronger ROE than otherlessors has more to do with the parent company than the operating performance of thebank. For example, leasing companies that are owned by a bank but operate as a subsidiaryhave the autonomy to focus on the leasing side of the business and need not worry aboutfunding the business. This allows the bank lessor to fine-tune its core competencies.Furthermore, the parent company subsidizes a portion of the bank lessor’s costs in the formof lower overhead allocations. Many executives surveyed for this Report, includingbankers, feel that if bank lessors managed all costs themselves, their balance sheets wouldlook less attractive.Productivity per Employee* (000's)by Lessor Type1999 9,000Net Earning Assets 39,500 48,900Lease/Loan Revenue 1,700 5,900 3,780 13,700New Business Volume 20,800 14,700BankCaptiveIndependentSource: ELA Survey of Industry Activity Report 1999 -2000, FIC Analysis*Median total employeesFigure 1112Banks also score highin overallproductivity (Figure11-12). Banks havethe highest averagevalue for net earningassets per totalemployee at 48.9million as well as ahigh lease/loanrevenue per employeeat 3.78 million.New business volumeper sales employee isalso strong at 45.7million, but banksperform at a distant

second to captives with 112.4 million per sales employee.Productivity per Sales Employee* (000's)by Lessor Type1999 29,969 213,253Net Earning Assets 151,871 5,742Lease/Loan Revenue 31,835 11,744 45,661 112,499New Business Volume 45,721BankCaptiveIndependentSource: ELA Survey of Industry Activity Report 1999 -2000, FIC Analysis*Sales employees include median inside and outside salesFigure 12CaptivesCaptives are profitable and continue to grow, albeit slower than other lessor types, as theirequipment sales expand. Captive leasing success centers on the sale of the product, not thesale of the lease. Captives have a clear advantage over both a bank and an independentthrough their ability to make adjustments to rates and residuals due to their extensive andproprietary knowledge of the underlying asset and the true cost to deliver. As one captivesaid, “We are asuccess if we sell ourequipment versusletting thecompetition win theLease Revenue as a Percentage of Total Revenuesale. The financing isby Lessor Typea great bonus. It1999gives us the latitudeto price our61.2%55.2%equipment differently50.3%and offer largesubsidies on thefinancing side of thedeal.”Captives finance themajority of theirequipment throughBankCaptiveIndependentSource: ELA Survey of Industry Activity Report 1999 -2000, FIC Analysis13Figure 13

leases versus loans. Although, the percentage of lease revenue to total revenue has slightlydeclined since1998, captives havethe highestpercentage of leaserevenue to totalTotal Liabilities to Net Worth by Lessor Typerevenue, 61.21999percent in 1999compared to otherlessor types (Figure7.1%13). They also holdthe highest increase6.6%in the volume ofoperating leases at12.2%30 percent.Bank Captive IndependentFrom a profitperspective,captives are highFigure 14Source: ELA Survey of Industry Activity Report 1999 -2000, FIC Analysisperformers. At 2percent, their ROAis the highest. They rank second in ROE and number one in pre-tax income as apercentage of total revenue, 22 percent. Using interest expense to net earning assets as aproxy for cost of funds, captives return the lowest ratio, 3.9 percent. Furthermore, theydemonstrate the lowest level of total liabilities to net worth of 6.6 percent (Figure 14) and ahigher use of short term funding as a percentage of total assets, 37 percent.Captives were highly productive and efficient in 1999. On a per sales employee basis,captives report the highest new business dollar volume, lease/loan revenue, average dollarvalue of assets ( 112.4 million, 31.8 million, and 213.2 million, respectively). Thelower number of originators drives origination effectiveness of captive lessors, with thislow number resulting from most sales being generated on the product side or by vendors.Captives are also highly successful at turning applications submitted into leases booked.On average, captives fund 85 percent of all application they approve, representing 48percent of all dollar requests submitted.Success has prompted captives to reach into new markets by extending beyond theirexisting focus. Captive lessors interviewed report a strong desire to provide holisticsolutions versus single transaction financing. To accomplish this, captive lessors willfinance both proprietary and non-proprietary equipment. Leveragability of currentknowledge to new products may provide a source of competitive differentiation.Captive lessors view the threat to their continued success to be ticket segment specific.For example, they believe that small to mid-size businesses are less likely to shopfinancing whereas larger companies will and often times do shop. As a result, competitionintensifies at the larger middle market and large ticket segments. A downturn in the14

economic health of the country will impact smaller businesses first and most likelyseverely curtail their spending. This will hurt the captive on two fronts: product sale andlease financing.Industry concentration and type of equipment financed will also impact captives in anegative economic climate. Residual values and the product market vary according toindustry and equipment financed. A lessor of durable, high residual equipment will farebetter than, say, a lessor of computer software, which one respondent categorizes as“unsecured lending” due to its low residual values. Industries classified as counter-cyclicalwill also weather negative economic change better than those reliant upon non-essentialspending.Like independents, captives depend upon funding to continue their business. According toone interviewee, corporate track record and not simply size determine funding cost. Evena small company that has a good banking relationship and a proven ability to manage itsreceivables can access the debt market with favorable rates. However, a number of largecorporations exist that have not handled their debt very well and face difficulty in thecapital markets.Credit quality may be alooming issue. Captivesdemonstrate the highestoverall delinquency rateof 3.4 percent. 1.9percent of the receivablesare older than 90 days(Figure 15), the highestamong lessor types.During interviews,captive lessors discussedthe tendency of captivesto write deals that banksand independents maynot be willing to do. Asone executive described,“The success of thishigher risk strategy willbe seen in a downmarket. Profits on thesale of product are greater than the potential for profit on financing, so there is a push tofinance sales, sometimes even at the expense of credit quality.”15

IndependentsIn 1999, independents generated 52 percent of all new business dollar volume (Figure 16).Although independents as a whole have enjoyed a rapid rate of growth in the past, mostinterviewees anticipate slower future growth.Interviews with independent lessors centered on lengthy discussions concerning highercosts both in funding and general operating expenses. Large independents may begenerating the best results. While the total volume contribution of independent lessorsTotal New Business Dollar Volume Allocationby Lessor Type19992%grew by 20 percentin 1999, the medianand the mean weresignificantly lower atnegative 4.3 percentand 9 percent,respectively.27%Profits seem most atrisk for independents52%versus other types of19%lessors. In total theygenerated the bothBank Captive IndependentOtherthe lowest ROE, 14percent and thelowest percentage ofFigure 16pre-tax income tototal revenue, 12.6percent. On a more positive note, independents generate an ROA of 1.7 percent, due topricing advantage. This performance is second only to the captive’s ROA of 2.0 percent.Source: ELA Survey of Industry Activity Report 1999 -2000Interviews with independent industry executives point to low leverage and higher cost offunds to explain the differences. They mention that a bank’s ability to maintain a higherlevel of debt to equity is a major driver in the higher average ROE reported in the SIA.Independents fare much better on the revenue side of the profit equation. As one executivestated, “A better comparative profit measure for the leasing industry is ROA. This iswhere you can see the pricing advantage that the independents have.” To explain thehigher ROA of an independent versus a bank’s higher ROE and pre-tax income as apercentage of total revenue, we need to break apart the ratios. Through this we find that asa percentage of total assets, independents generate more revenue than banks. Independentsmay be pricing higher either due to deal complexity or added risk. The higher price results16

Bank Expense Components as a Percentage of Total RevenueInterest is Largest Expense Component Relative to Revenue100%41%27%9%7%1.5%Total RevenueInterestExpenseSales,Marketing,Other ExpenseDepreciationExpenseTax ExpenseProvision14%RevenueRemaining asPercentage ofTotal RevenueSource: ELA Survey of Industry Activity Report 1999 -2000, FIC analysisFigure 17in higher revenue and, ultimately, higher ROA. But, with less debt and more equity andnot enough compensating revenue, the ROE for the independent is lower.Furthermore, while the revenue is higher for an independent, so too is the operatingexpense versus a bank (Figures 17-18). Customer acquisition costs are much higher forindependents as they are constantly generating new clients. Therefore, as a percentage ofrevenue, their pre-tax income is lower. According to the productivity reported in the SIA,an average independent requires 241 percent more people versus a bank lessor whilegenerating only 151 percent more volume. This underscores the inherent value of beingable to leverage a bank customer relationshipIndependent Lessor Expense Components as a Percentage of Total R evenueSales, Marketing and Other is Largest Expense Component Relative to Revenue100%23%40%21%5%2%Total RevenueInterestExpenseSales,Marketing,Other ExpenseDepreciationExpenseSource: ELA Survey of Industry Activity Report 1999 -2000, FIC analysisTax ExpenseProvision9%RevenueRemaining asPercentage ofTotal RevenueFigure 18These cost factors point toward increased consolidation of the independents. Manyindustry executives fear that debt and operating costs will eventually become too high and17

difficult to manage, forcing them into a sale situation. But the path differs forindependents based on their size and strength.Large, well-established and highly rated companies will continue to grow. Middle andsmall tier firms bear the burden of the risks. Negative press, high profile losses, and lowercredit quality threaten their continued viability. Banks and large independents view this asopportunity to either acquire additional assets or to buy (rather than build) capabilities.Independents demonstrate lower average productivity versus banks and captives. For newbusiness volume, the average sales employee generated 45.6 million in new businessdollar volume. Independents also generate the fewest revenue dollars per sales employeewith 5.7 million. In addition, they demonstrate a weaker ability to turn applications intobooked leases with only 47 percent of total new application units submitted being booked.However, independentlessors book the highestpercentage ofApplication Units and Dollars Booked as a Percentagapplication dollarsApplication Units and Dollars Submitted by Lessor T1999submitted, 53 percent(Figure 19). They maybe more successfulIndependents47%53%booking larger ratherthan smallerapplications.CaptivesGenerally,independents tend tohave a greater appetitefor risk than their bankcounterparts. This givesthem the pricing andvolume advantages butobviously placesadditional risk on thecompany in the eventof an economic downturn.Banks85%55%Application Units Booked48%39%Application Dollars BookeSource: ELA Survey of Industry Activity Report 1999 -2000, FIC Analysis*Sales employees include inside and outside salesFigure 19The good news is that credit quality currently appears to be holding. 98 percent of theirreceivables are paying within 30 days. This is the highest percentage of all lessor types.The allocation of the remaining 2 percent of delinquencies predominately in the 31-60 andgreater than 90 days categories may be a longer-term credit quality issue.Vendor FinanceVendors finance has become an increasingly important part of the leasing industry.According to the SIA, the small and micro ticket segments depend on vendor relationshipsand drive over half of its new business volume. The small ticket segment alone generates18

37 percent of to

ticket sizes: micro ticket, up to 25,000; small ticket, from 25,000 to 250,000; middle market from 250,000 to 5 million; and large ticket, over 5 million. Our Report begins with an overview of the leasing industry's recent overall performance and then discusses performance by type of lessor and ticket segment. The report goes on