The Dutch leasing market is going through an interesting time
with mixed consequences for lessors, says Margaret Waldren.

Two contrasting developments are battling for priority in an
evaluation of the Dutch market in 2007: economic problems emanating
from the credit crisis versus leasing’s record performance.

The European Commission forecasts that average economic growth
in the EU will be 2.4 per cent in 2008. The Netherlands, at 2.6 per
cent, is close to this, but the Dutch Leasing Association (NVL)
believes that this positive view should be tempered, pointing to
the likelihood of growth continuing to decline and rising

NVL also believes it is inevitable that the economy will be
dealt a blow in the second half of 2008, and that if the propensity
to invest reduces as a result this will impact leasing.

The huge leap in new business in 2007 cannot be explained solely
by the increase in leasing opportunities. NVL said that Basel II
has caused a reallocation of credit products that has benefited

Dutch leasing is predominantly transport: lorries, trailers,
semi-trailers, sea containers, coaches, cars and equipment such as
forklifts. The company vehicle market is highly cyclical due to
advances in environmental technology and changes in the European
flow of goods. Developments in Eastern Europe are causing
considerable fluctuations in sales. The lorry sector is highly
concentrated, largely as DAF’s market share is twice that of other

The most important – and growing – sales channel is the banks’
network of branches, which generally sell relatively simple
products to SMEs.They are also important as an intermediary for
more complex credit structures and larger investment requiring
lessor’s fiscal, accounting and legal support.

NVL said that a significant development is a changing attitude
because of risk-based pricing. Banks are appreciating the value of
types of financing where risk is reduced by regular lease
instalment payments linked to a largely predictable value of the
asset over a period of time.

Vendor leasing also grew in 2007, but there is a disconcerting
trend towards increased customer protection where service provision
is inadequate. In a recent Supreme Court case, a customer
successfully sued a lessor for shortcomings on the part of the
supplier. In NVL’s view, despite the ruling, lessors cannot be held
liable for their partners’ failings, provided the tasks and
responsibilities are clearly demarcated in advance.

As the risk analysis leads to much more accurate price
differentiation, competition for better customers with better
assets is heating up. In a market dominated by leading brands and
where half of assets are leased, this supply-side development will
have significant consequences.

Strong demand for equipment has sharply upped manufacturers’
delivery times. This has so far kept prices of second-hand
equipment high, which has temporarily lowered the risk profile of
many lease portfolios. The large increase in company vehicle
registrations will put pressure on residual values and increase
supply in the second-hand market. NVL said that the customary sales
channels in the second-hand market are in danger of becoming choked
as technically advanced assets can no longer be sold in third-world