Canadian Finance

1
The Canadian Marketplace

• Joseph R. LaLeggia
• Immediate Past Chair, Canadian Finance Leasing
  Association
• President, IRWIN COMMERCIAL FINANCE

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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

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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 industrys customers are small
  and medium-sized businesses
• 10 to 1 rule to the U.S.

www.canadianleasing.ca
4
Assets Owned Managed in Canada

• Owned managed assets grew 11 in 2006 to
  C106.6 billion
• Equipment and commercial vehicles accounted for
  46 of the total

Source 2007 CFLA Survey of Industry Activity
5
New Business Volumes

• Business spending on machinery and equipment was
  C93.8 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
6
Market Drivers

• Economic Growth
• Interest Rates
• Capital Costs Availability
• Demand for Equipment and Capital
• Health of the Industry and Competitive Pressures

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

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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
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
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
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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
12
The CADs Rise is Reducing Canadas 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
13
Competitive Pressures Mounting

• In a buyers 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
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. Its rarely the body

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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

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Canada The Readers Digest Version

• Canada-US trade partnership
• Each others 1 customer
• US2 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

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Current Issues

• Vicarious Liability
• Tax depreciation for ME
• Accounting Standards (Harmonize small bus.)
• Sales tax new reporting
• Electronic waste disposal taxes who collects
• Credit/liquidity crunch

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Thank youQuestions?For more
informationCanadian Finance Leasing
Associationwww.canadianleasing.ca