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November 3, 2011updated 12 Apr 2017 4:11pm

European leasing market – a look ahead

There have been a number of interesting developments in the European leasing market during 2011 which will no doubt continue into 2012 and beyond. Most notably the international players are back to pre-crisis profit levels which enables them to invest into their future

By Jens-Uwe Berg

2012 should be another year of growth, but challenges remain, says Jens-Uwe Berg from JATO Dynamics.

 

There have been a number of interesting developments in the European leasing market during 2011 which will no doubt continue into 2012 and beyond.

Most notably the international players are back to pre-crisis profit levels which enables them to invest into their future. We are seeing more activity to re-design internal processes to maximise efficiency and improve cost-per-contract in order to remain competitive.

Not only has the tighter portfolio management had a positive impact on the bottom line, but the residual value of fleet vehicles has also risen from the lows experienced over the past few years to boost remarketing revenue for leasing companies.

In any event operational leasing share is growing in most markets irrespective of their maturity and despite potential threats from new accounting rules.

The availability of funding is stabilising (except in some Central and Eastern European markets and countries hit by the debt crisis) and this year has seen some very interesting mergers and acquisitions in the sector. In Spain, for example, Arval bought the operational leasing activities of La Caixa forming the number one provider in Iberia.

More recently Alphabet, the international multi–brand fleet management division of BMW Group, announced it will further strengthen its European market position through the acquisition of ING Car Lease, a division of Dutch ING Group.

With the interest rate still very low in the eurozone (even with changes expected in 2012) some cash-rich companies are tempted to buy rather than lease vehicles and outsource the operation of their fleet to a specialist fleet manager.

Others use the different approach of ‘cherry-picking’ models on offer to optimise operational lease costs while enjoying the benefits of consolidated reporting and fleet management consulting to optimise ownership cost.

Most European lessors now also offer fleet management-only solutions and in that sector we can see investment and growth in 2012 as well.

‘Green fleet’ initiatives will increase in 2012. However, only if governments, manufacturers and leasing companies jointly promote them (and potentially share risks as well), will the operation of these vehicles become financially viable.

In recent studies the most optimistic forecasts suggest that in 2025, 10% of all cars sold will be electric, 40% will be hybrid, with the remaining 50% still using diesel or petrol internal combustion engines. This shows it will remain difficult for some time to accurately predict residual values and SMR-cost for electric vehicles.

All in all it appears 2012 will be another year of growth for the European leasing and fleet management industry, but, as ever, challenges in the market remain.

Jens-Uwe Berg is market development manager for global leasing at JATO Dynamics

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