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The Canadian Marketplace

The Canadian Marketplace. Joseph R. LaLeggia Immediate Past Chair, Canadian Finance & Leasing Association President, IRWIN COMMERCIAL FINANCE. The Canadian Finance & Leasing Association. Equivalent to ELFA in the U.S.

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The Canadian Marketplace

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  1. The Canadian Marketplace Joseph R. LaLeggia Immediate Past Chair, Canadian Finance & Leasing Association President, IRWIN COMMERCIAL FINANCE Canadian Finance & Leasing Association ~ Association canadienne de financement et de location 2007 ELFA Annual Convention Panel on International Markets October 28, 2007

  2. The Canadian Finance & Leasing Association • Equivalent to ELFA in the U.S. • The association represents both equipment and vehicle leasing (fleet + consumer) industry in Canada • 250+ members • Many members are Canadian affiliates of American parents • Industry dominated by top 20 companies which own or manage 95% of total assets Canadian Finance & Leasing Association ~ Association canadienne de financement et de location 2007 ELFA Annual Convention Panel on International Markets October 28, 2007

  3. Key Funding Partner for Canadian Business • After the traditional lenders (banks and credit unions), CFLA members are the largest provider of debt financing • About 60% of the industry’s customers are small and medium-sized businesses • 10 to 1 rule to the U.S. www.canadianleasing.ca Canadian Finance & Leasing Association ~ Association canadienne de financement et de location 2007 ELFA Annual Convention Panel on International Markets October 28, 2007

  4. Assets Owned & Managed in Canada • Owned & managed assets grew 11% in 2006 to C$106.6 billion • Equipment and commercial vehicles accounted for 46% of the total Source: 2007 CFLA Survey of Industry Activity Canadian Finance & Leasing Association ~ Association canadienne de financement et de location 2007 ELFA Annual Convention Panel on International Markets October 28, 2007

  5. New Business Volumes • Business spending on machinery and equipment was C$93.8 billion in 2006 • Market penetration: between 21%-23% of this spending is financed by CFLA members Source: 2007 CFLA Survey of Industry Activity; Statistics Canada Canadian Finance & Leasing Association ~ Association canadienne de financement et de location 2007 ELFA Annual Convention Panel on International Markets October 28, 2007

  6. Market Drivers • Economic Growth • Interest Rates • Capital Costs & Availability • Demand for Equipment and Capital • Health of the Industry and Competitive Pressures Canadian Finance & Leasing Association ~ Association canadienne de financement et de location 2007 ELFA Annual Convention Panel on International Markets October 28, 2007

  7. Canada: An Economic Success Story • Canada is experiencing its second longest period of economic expansion in history • Business investment is expanding for a fifth consecutive year • Canada is on the strongest fiscal footing of any G7 nation with federal and provincial government budget surpluses and a falling debt burden • Core inflation remains within a set range of 1% to 3% Canadian Finance & Leasing Association ~ Association canadienne de financement et de location 2007 ELFA Annual Convention Panel on International Markets October 28, 2007

  8. Leasing Market Trends • Fourth year of rising new business leasing volumes • 16% growth in 2006 • 16% average annual compound growth since 2002 • Intensely competitive business environment with too much money chasing too few deals Source: 2007 CFLA Survey of Industry Activity Canadian Finance & Leasing Association ~ Association canadienne de financement et de location 2007 ELFA Annual Convention Panel on International Markets October 28, 2007

  9. Positive Economic Outlook • Real GDP is expected to grow 2.7% this year and 2.3% next year • Corporate profits are at record levels Source: Statistics Canada Canadian Finance & Leasing Association ~ Association canadienne de financement et de location 2007 ELFA Annual Convention Panel on International Markets October 28, 2007

  10. Cost of Funds Will Rise – But Not by Much • Interest rates in Canada are expected to rise again soon – but not by much • While yields on government securities have not moved much, the subprime crisis continues to restrict liquidity in the market for asset-backed commercial paper Source: Bank of Canada; Macroeconomic Advisers, LLC Canadian Finance & Leasing Association ~ Association canadienne de financement et de location 2007 ELFA Annual Convention Panel on International Markets October 28, 2007

  11. …But Business Spending on Machinery and Equipment has Disappointed • Despite solid economic growth, strong profits and falling capital costs, growth in business spending on machinery & equipment has been tepid • It is expected to rise just 1.2% this year and 4.3% next year Source: Statistics Canada; The Centre for Spatial Economics Canadian Finance & Leasing Association ~ Association canadienne de financement et de location 2007 ELFA Annual Convention Panel on International Markets October 28, 2007

  12. The CAD’s Rise is Reducing Canada’s International Competitiveness • In January 2002, the CAD was worth 62.5 US cents; today it is worth over $1 US • This rise has reduced our international competitiveness, but too little new business investment is taking place to improve our productivity Source: Bank of Canada Canadian Finance & Leasing Association ~ Association canadienne de financement et de location 2007 ELFA Annual Convention Panel on International Markets October 28, 2007

  13. Competitive Pressures Mounting • In a buyer’s market, has pricing been rational? • Reduced liquidity could spur a new round of mergers and acquisitions Source: 2007 CFLA Survey of Industry Activity; Statistics Canada Canadian Finance & Leasing Association ~ Association canadienne de financement et de location 2007 ELFA Annual Convention Panel on International Markets October 28, 2007

  14. Impact of Globalization in Canada • Globalization has many dimensions Business Growth – Canada welcomes investment by leading foreign firms but produces few of its own global leaders Business Standards – Canada “follows the leader” • Canada tends to be “one of the arms of globalization. It’s rarely the body” Canadian Finance & Leasing Association ~ Association canadienne de financement et de location 2007 ELFA Annual Convention Panel on International Markets October 28, 2007

  15. The Future of Leasing and Finance • The future of leasing & finance is linked to the economy • Canadian economic fundamentals are basically positive • The health of the US economy is a major driver of the Canadian economy • Risks to the US economy frequently become risks to the Canadian economy as well Canadian Finance & Leasing Association ~ Association canadienne de financement et de location 2007 ELFA Annual Convention Panel on International Markets October 28, 2007

  16. Canada: The Reader’s Digest Version • Canada-US trade partnership • Each others #1 customer • US$2 billion of goods cross the border each day • Innovative technology & manufacturing • Automotive & aerospace production • Blackberry • Canada: Natural Resources Superpower • 2nd largest proven oil reserves • 3rd in natural gas production • 1st in hydro electric power generation • 3rd largest producer of aluminum & diamonds • 1st largest exporter of forest products • 3rd largest supply of renewable fresh water Canadian Finance & Leasing Association ~ Association canadienne de financement et de location 2007 ELFA Annual Convention Panel on International Markets October 28, 2007

  17. Current Issues • Vicarious Liability • Tax depreciation for M&E • Accounting Standards (Harmonize & small bus.) • Sales tax – new reporting • Electronic waste disposal taxes – who collects • Credit/liquidity crunch Canadian Finance & Leasing Association ~ Association canadienne de financement et de location 2007 ELFA Annual Convention Panel on International Markets October 28, 2007

  18. Thank youQuestions?For more information:Canadian Finance & Leasing Associationwww.canadianleasing.ca Canadian Finance & Leasing Association ~ Association canadienne de financement et de location 2007 ELFA Annual Convention Panel on International Markets October 28, 2007

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