In recognition of the Leasing Life conference arriving in Estonia this year, Reet Hääl, chief executive of its national leasing association, describes how leasing is driving the Baltic state’s economy forward.

The Estonian Leasing Association unites companies that are banks or bank-owned credit institutions.

There are nine members of the association and it unites the majority of companies in the leasing market, covering approximately 98% of the total volume.

Credit and financing institutions have always played an important role in the Estonian economy – the operations of leasing companies are greatly influenced by the banks. Despite being independent legal corporate bodies, most leasing companies are subsidiaries financed by parent banks.

The rapid growth of the leasing market can be explained by comparatively liberal tax and legal conditions to practice leasing in Estonia.

New leasing business carried out in 2017 by members of our association was €1.2bn (£1.06bn), representing growth of 10% when compared to 2016.

For the half-year for 2018, the figure was €663m, a growth of 6% compared to 2017. The Estonian equipment leasing market is vehicle-oriented: 50% of the market is vehicles, 20% is commercial vehicles and 30% is taken by machinery and other equipment.

The main contract type, according to the lease portfolio, is finance lease with 56%; operating lease holds 42% and hire purchase just 2%.

By customer type, the private sector holds the biggest share of the overall portfolio with 65%, followed by industry with 21% and the agriculture sector with 12%.

Primary contract terms show that 62% of contracts are signed for between three and five years.

The lease portfolio (residuals) in the 2018 half-year totalled €2.7bn, with a growth of 10% compared to last year.

Factoring is a financial service offered by most of our members. In the 2018 half-year, the total factoring turnover was €1.7bn, representing a growth of 28% compared to the 2017 half-year.

Residuals reached €436m, with a growth of 24%. When looked at comparatively and on a larger scale, our leasing sector trend indicators are close to the European average.

The leasing market in Estonia has mostly experienced quite steady growth, though from January 2018 an additional tax was applied to company cars, as well as an obligation to make a note accordingly in the Estonian Road Authorities Register.

As a consequence, a considerable amount of passenger car contracts were transferred from companies to private users. There is no major competition to the leasing sector from vendors in Estonia.

Direct vendor financing is not a characteristic of our market, and the leasing sector feels that most of the competition it experiences comes from banks and their car credit products, as smallerscale loans of up to €15,000 are quite easily obtained. No major changes to the Estonian leasing market are foreseen.