The Russian leasing market entered 2024 with a sense of cautious optimism. New business volumes showed a modest 6% increase over the first 10 months of the year, compared to the same period in 2023. The third quarter, in particular, posted a strong 15% year-on-year rise, buoyed by major corporate transactions in rail and real estate. But behind these headline figures lies a more complex reality. Strip away these large-scale deals, and the market would have shrunk by 7% — a sign of growing strain on the sector.

Wartime economy

Almost 3 years after Russia’s full-scale invasion of Ukraine, the country’s economy remains on a war footing, reshaping investment priorities and financial conditions. While state-backed industries continue to drive growth in select sectors, high interest rates and economic sanctions have intensified pressure on the leasing market. The sector has managed modest growth in 2024, largely due to major corporate deals, but declining retail demand and rising financing costs are expected to take their toll in 2025.

Retail leasing under pressure

For smaller businesses and individual lessees, the picture is bleaker. The retail leasing segment contracted by 4% in the first 10 months of 2024. Truck leasing—historically one of the sector’s core pillars — declined by 11%, while construction equipment leasing fell by 18%. The slowdown reflects a combination of high interest rates, rising costs, and waning demand as construction activity loses steam. The end of preferential mortgage programmes and declining purchasing power have pushed developers to cut back on new projects, further dampening demand for leased equipment.

Corporate deals keep the market afloat

While retail leasing struggles, large corporate deals have injected some much-needed momentum into the sector. Companies such as the State Transport Leasing Company (GTLK) and Sberbank Leasing have played a key role in driving corporate growth, particularly in the rail sector. Railway equipment leasing surged by 44%, with GTLK securing a major contract for the supply of 41 high-speed trains for the Moscow–St. Petersburg line. But even this area of strength is showing signs of fatigue. The 53% growth in corporate leasing in 2024 is significantly lower than the 114% surge recorded in 2023.

Meanwhile, the air and water transport sectors remain in distress. A shortage of imported components and constrained production capacity have led to a sharp drop in new business — down 20% for aviation and 53% for watercraft.

Rising costs squeeze business activity

One of the biggest challenges facing the leasing sector is the cost of financing. The Russian Central Bank has maintained interest rates at around 21% to combat inflation, but the impact on leasing businesses has been severe. High borrowing costs have pushed up lease payments, forcing businesses to delay non-essential purchases.

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“All leasing companies have adjusted their pricing terms following rate increases,” says Alexey Kazak, CEO of Sovcombank Leasing. “The new realities are limiting customer demand — non-urgent purchases are being postponed, and plans to renew fleets are being revised.”

The number of lease deals remained flat at 344,000 in 2024, but the average contract size rose by 28%, driven by higher financing costs and a shift toward larger corporate transactions.

A consolidating market

The pressures on the leasing industry are driving consolidation. The market is increasingly concentrated, with the top 10 players accounting for 80% of new business in 2024 — up from 77% in 2023 and just 64% in 2021.

“The market continues to concentrate,” says Ruslan Korshunov, Managing Director for Bank Ratings at Expert RA. “Asset quality is deteriorating, but the industry’s safety margin is still comfortable. We expect that in 2025, the leasing market will decline by about 20%.”

Among the major players, Gazprombank Leasing saw a modest 5% increase in new business, while GTLK posted the strongest growth in the top 20, up 119% year-on-year. Sberbank Leasing also expanded, albeit at a more modest 5%.

Growing defaults and early terminations

A worrying trend emerging in 2024 is the rising number of early contract terminations. Faced with financial distress, more businesses are returning leased assets, leading to a glut of repossessed vehicles and equipment on the secondary market. Even highly liquid assets that were quick to sell in previous years are now taking longer to offload, often at a discount.

“The combination of high interest rates and deferred demand from previous years is slowing the market down,” says Vyacheslav Spirov, CEO of Gazprombank Leasing Group. “We’re seeing more companies struggle with repayments, leading to an increase in repossessions.”

A challenging outlook for 2025

With interest rates remaining high, economic uncertainty persisting, and international sanctions tightening, the Russian leasing sector faces a difficult road ahead. While government initiatives — such as the preferential leasing programme— are providing some support, they are unlikely to offset the broader economic challenges.

Industry leaders anticipate a 20% decline in new business volumes in 2025, marking a stark reversal from the relative stability of 2024. As businesses reassess their investment plans and financing costs remain elevated, leasing companies will need to navigate an increasingly difficult landscape.