About Us: Introduction

Asset-based financing raises Canadian living standards

“Asset-based financing, investment and economic growth in Canada” a recently published groundbreaking study prepared by The Centre for Spatial Economics, a respected, independent group of economists who are also retained by the federal Department of Finance, has found that:”the rise in asset-based financing from 1992 to 2002 improved living standards in Canada by 2.3% (or about 8% of the 26.8% increase in Canadas living standards over that period)”

Asset-Based Financing Expands the Pool of Capital and Credit

Asset-based financing is the financing of particular equipment and vehicles and related items or services, primarily by way of lease, but also by secured loan or conditional sales contract.

The specific assets financed secure the borrower’s unconditional obligation to make payments over the term of the agreement. In this way, users of equipment and vehicles can use the value of the asset as security to finance its acquisition. This form of financing relies on cash-flow-based credit analysis. Because the financing company retains legal ownership of the asset until the lease end, it allows a business or person to qualify on generated cash flow rather than on a net worth lending formula basis as typically offered by traditional lenders.

The services of the leasing industry are complementary to traditional banking and other financial lending in providing incremental capital to increase the pool of available credit in Canada and provide a vital competitive alternative in the financial services sector.

Industry Profile

The Canadian Finance & Leasing Association represents the interests of the asset-based finance industry in Canada.

It is estimated that asset-based finance in Canada finances over $335 billion of vehicles and equipment in Canada, making it the largest provider of credit and capital to Canadian businesses and consumers after traditional lending. It is much larger that most Canadians realize and increasingly has become entrenched in the economy, expanding the pool of available capital and offering a competitive choice to businesses and consumers.

Asset-based financing is offered by banks, credit unions, insurance companies, government financial institutions, manufacturer finance companies, independent finance companies and by vendors.  Vendor financing is probably the most direct way for manufacturers to access equipment financing.  That is, manufacturer finance companies, independent finance companies or banks providing financing through equipment vendors at the point of sale.

What is Asset-Based Financing?

Asset based finance is not the same as a classic loan. The industry complements the work of conventional lenders but stands alone as its own alternative way of financing.

As its name suggests, asset-based finance is the financing of a specific asset: a vehicle or piece of equipment, commonly by way of a lease, loan, conditional sales contract or by a line of credit. The customer doesn’t actually own the equipment or vehicle; the financing company owns it until the customer buys it or returns it. The asset is the principal collateral for the customer’s obligation to make regular payments. 

This has implications for both the financing company and the customer. It affects the way a financing company decides on applications. The essential determining factor is not customer net worth, as it would be in conventional lending, but cash flow. Can the customer generate sufficient revenue by using the equipment to afford the monthly payments?  From the customer’s point of view, this form of finance offers an advantage: It allows them to use vehicles or equipment without using up their regular bank credit.

Asset financing is less about how much money you need and more about equipment or vehicle selection and model specifications.  Since its very beginnings, the people in asset-based finance have become experts in different equipment and vehicles and how they will be used.  They must understand the equipment or vehicle and its value at every stage of its useful life.  From receipt of the customer’s application to the asset’s return or repossession, the finance company must know what the asset is worth and how it is used. This is crucial to safeguard its position. In the case of a lease, finance companies must accurately forecast the value of the asset in the event they get it back several years later.

Asset-based finance market in Canada

Estimates of the volume of new business and the value of assets financed by the asset-based finance industry are derived by The Centre for Spatial economics (C4SE) from Paynet’s Canadian Business Lending Index (CBLI) and DesRosiers Automotive Consultants’ data on fleet and retail vehicle activity.

The new business volume estimates are divided between public and private sector new machinery and equipment, the fleet vehicle and the retail vehicle markets. For purposes of this analysis, machinery and equipment excludes passenger vehicles and light trucks acquired by public and private enterprises (the fleet vehicle segment) but includes heavy trucks and other transportation equipment.

Asset-based finance new business volumes are heavily influenced by trends in the economy. The recession of the 1990s led to a decline in new business volumes as did the financial crisis starting in 2008 and the subsequent recession. Total new business volumes rose from an estimated $43 billion in 1990 to $114 billion in 2014. New business volumes are dominated by the retail vehicle segment which accounted for 69% of the total in 2014 while the fleet vehicle market’s share was 9%. The equipment and commercial vehicle segment was 33% of the total in 1990 and 31% in 2014.

Growth in the asset-based finance market slowed in 2014 from 8.6% to 4.6% for total new business. The fleet vehicle market was the strongest segment, growing 13.1% in 2014 while machinery and equipment fell 0.8%; leading to equipment and commercial vehicles new business growth of 2.7% in 2014. New business in the retail vehicle market grew 5.5% in 2014 down from 8.9% the year before.


The total value of assets financed by the industry is estimated to have grown 7.0% in 2014 – roughly the same rate as the previous year – with the fleet vehicle segment leading the industry.


The asset-based finance sector was estimated to finance 41%1 of all spending on equipment and commercial vehicles in 2014: down from 44% in 2013. The outlook for new business in 2015 is based on Paynet’s CBLI for the first quarter of the year and shows declines that match the slowdown anticipated by Statistics Canada’s survey of public and private investment spending.

It is also estimated that 90% of all new retail motor vehicle sales are financed with leases accounting for 22%. Leasing’s share of new retail motor vehicle sales continues to improve from its collapse in 2009 to just 7% of all new vehicles but is still well of its peak of 45% in 2005.

The reader is cautioned that the statistics presented here are estimates based on extensive research conducted on the behalf of the CFLA. While every attempt has been made to ensure that they are representative of activity in the market, it is possible – perhaps even likely – that additional research will allow further refinement and improvements to these estimates in the future.

1 This statistic is often referred to as the penetration rate. Comparisons of this rate with previous estimates of the leasing penetration rate are not possible because of changes in both the types of financing and the types of organizations included in the estimate of new business.

Asset-Based Financing Raises Canadian Living Standards

“Asset-based financing, investment and economic growth in Canada”, a recently published groundbreaking study prepared by The Centre for Spatial Economics, a respected, independent group of economists who are also retained by the federal Department of Finance, has found that:

“the rise in asset-based financing from 1992 to 2002 improved living standards in Canada by 2.3% (or about 8% of the 26.8% increase in Canadas living standards over that period)”

Key findings

Investment drives productivity – economic research states that machinery and equipment investment directly contributes to labour productivity gains by increasing the amount of productive capital available for workers to use. Research also suggests that machinery and equipment investment is either directly the agent of technological change, or else an important facilitator in the diffusion of new technology.

Productivity raises living standards – in order to boost living standards either labour productivity needs to rise, or people need to work harder, or more people need to become employed, or more people of working age need to enter society relative to total population. Canadian living standard gains rely primarily on labour productivity growth.

Financial system development promotes investment – research conducted by the OECD supports the notion that financial system development promotes capital spending and that countries with weaker financial systems are unable to effectively channel domestic or global savings towards new investment opportunities.

Asset-based financing adds significantly to the financial system – the analysis in this report finds that asset-based financing was responsible for a 2.3% increase in Canadas living standards over the decade 1992 to 2002 (or about 8% of the total increase in Canada’s living standards over that decade). Asset-based financing makes a significant positive contribution to increasing national living standards.

Policy Implications

Financial innovation – financial choice and innovation need to be encouraged in order to maintain a healthy and growing financial system. A dynamic financial system is one of the key factors in promoting investment, raising productivity and, therefore, improving our standard of living.

Tax policy – government policy in Canada does not encourage investment in machinery and equipment to the degree that the economic research suggests would be optimal. Therefore, a strategy of improving the economic climate for machinery and equipment investment should pay significant dividends in terms of stronger economic growth, higher productivity and living standards for Canadians for many years to come. This could be done in a horizontally equitable manner by encouraging all forms of investment spending because of the potential complementary nature of machinery and non-machinery investment in boosting economic growth and productivity.

These important policy considerations underlie our advocacy efforts with all levels of government and other stakeholders.

Association Profile

The Canadian Finance & Leasing Association (CFLA) is the only organization advocating the interests of the asset-based financing, vehicle and equipment leasing industry in Canada. Through CFLA, members are able to influence the shape of the industry’s future within the competitive financial services sector.

Established in September 1993 through the merger of the Canadian Automotive Leasing Association (CALA) and the Equipment Lessors Association of Canada (ELAC), the Association has grown from an initial membership of 61 companies to almost 200 today.

Members range from large multinationals to national and smaller regional domestic companies, crossing the financial services spectrum from manufacturers’ finance companies and independent leasing companies, to banks, insurance companies, and suppliers to the industry.

The Association has four key responsibilities:

  • Advocacy – to key publics including governments, media, other associations in the financial services sector, and the general public.
  • Education – providing member employees with sessions on the basics of asset-based financing and leasing as well as seminars and workshops on specific industry topics.
  • Information – providing timely information to members to alert them of changes that may directly impact their businesses.
  • Networking – providing a forum and creating opportunities for industry leaders and their employees to meet, exchange information on issues of common interest, and learn best practices from each other.

CFLA’s annual national conference (held in the fall) is the leading event of the CFLA calendar bringing together approximately 300 industry leaders.

The annual Toronto golf tournament is held in May.

CFLA publishes online an annual survey of the asset-based financing, equipment and vehicle leasing business activity carried on by reporting members.

CFLA’s website has become the industry’s electronic information resource centre with a growing archive of information focused on the business of asset-based financing and leasing in Canada. The site provides a range of “member-only” value added services. Changes in government policy, new legislation and regulation, the latest court decisions, legal, accounting and tax commentaries by CFLA professional members are regularly e-mailed on a timely basis to members located across the country. The delivery of timely information to members is further augmented by the regular CFLA eBulletin, an e-mail newsletter.

The Association also offers an education program called Canadian Lease Education On-demand or “CLEO” which consists of eleven pre-taped webinars designed to enhance one’s general understanding of the asset-based financing, equipment and vehicle leasing business in Canada.

Membership Profile

As at June 30, 2011, CFLA had 198 members: 63% were Regular Members (that is, members active in the business of asset-based financing and leasing), the Associate Members (that is, members who supply services to the Regular Members such as law and accounting firms, funders, software developers, etc.) made up 32% of the membership. The remaining 5% of the members were non-residents.


CFLA is a federal non-profit corporation with its head office located in Toronto, Ontario.

There are three classes of membership: Regular Members, Associate Members and Non-resident Members. Regular Members are enterprises in the active business of asset-based financing and leasing. Associate Members are enterprises that provide services to the industry (such as law and accounting firms, funders, software developers, auction houses, etc.) Non-resident Members are interested in the asset-based financing and leasing industry in Canada but are not resident in this country.

A Board of Directors nominated from the Association membership and elected for two-year terms by the Members determines CFLA policies. The Board is composed of business leaders representing a cross-section of the industry in terms of market size, area of business and geographical location.

There is an Executive Committee composed of the Chairman, the Vice-Chairmen, the Secretary-Treasurer with one or more members at large plus the President. The Executive Committee is appointed by the Board.


Much of the active work of the Association is conducted by seven committees

  • Accounting
  • Automotive Finance Working Group
  • Education & Program
  • Fleet
  • Legal
  • Small Ticket Funders, and
  • Taxation

In their relevant area of expertise, the committees serve as:

  • CFLA’s radar – being proactive – bringing forward intelligence, issues, challenges and opportunities affecting the industry;
  • CFLA’s sounding board – to react to issues and advise on policy options;
  • an exchange for information, experience and expertise;
  • a channel to disseminate information relevant to the industry.

Association Staff

A full-time professional staff of four people manages the Association:

  • David Powell, President & Chief Executive Officer
  • Lalita Sirnaik, Manager, Finance & Administration
  • Matthew Poirier, Director, Policy
  • Charlene Forde, Director, Events & Member Services
  • Sarelli Mendoza, Administrative Secretary

Last updated: April 2012