Frankfurt, 23rd November 2010 – The leasing market in Germany has this year grown by 4.0 percent, with leasing companies thus far acquiring 43.6 billion euro’s worth of new business. “Following the dramatic fall in business in 2009, the leasing markets have rebounded in the second half of the current year,” explained Martin Mudersbach, President of the Bundesverband Deutscher Leasing-Unternehmen (BDL), at today’s press conference of the federal association of German leasing companies. Although equipment leasing fell by almost four percent in the first half of 2010, the amount of new business transacted in the equipment-leasing segment over the entire year has risen to 41.1 billion euro, which is 2.5 percent more than in 2009. However, this increase falls short of the across-the-board increase in equipment investment in the current year, which the Ifo Institute for Economic Research estimates will be in the region of 5.5 percent. The amount of new business generated through the leasing of real estate has increased by 35.6 percent to 2.6 billion euro, after having fallen to just 1.9 billion euro in 2009.
“It has taken a little longer for the economic upturn to reach the leasing sector,” explained Mudersbach. According to the BDL President, this entirely unusual development may be explained by the fact that companies have been opting to finance a large part of their investment spending out of their cash flows. Certainly, loans to companies have failed to increase in line with the improving economic situation. The leasing penetration rate in the equipment sector fell slightly (to 21 percent), but leasing continued to account for just under 50 percent of all investments financed through external funding. The leasing sector expects considerably stronger growth in 2011, when agreements for the supply of capital goods are honoured, and customers finally take delivery of the items they have ordered. “Sentiment in the leasing sector is more upbeat than it has been for quite some time,” claimed Mudersbach, “so an upturn in the coming year may well be on the cards.” The Ifo Investment Indicator would appear to support this view, for it shows that leasing companies have not been so optimistic about the coming six months since 2006.
Leasing Market Segments
There were considerable variations in demand for the various types of capital goods leased. Leasing of road vehicles (i.e. cars and commercial vehicles), which constitute the largest market segment, was up by 2.6 percent. “Vehicle leasing was hit by a drop in the number of private leasing customers,” commented the BDL President on this very modest rate of growth. “Private customers almost always want to lease cars, and the extraordinary response of private motorists to the scrappage scheme in 2009 has left the market very flat.” The volume of new business transacted with private households has indeed more than halved, having fallen some 54.8 percent from 5.8 billion euro for 2009 to just 2.6 billion euro so far for the current year.
“But we are now seeing record waiting times of several months for new vehicles,” continued Mudersbach. “Orders placed today only enter the statistics when the vehicle is actually delivered. And that could be some time next year.” The situation is similar in the production-machinery segment, where the increase in new business (1.6 percent) has fallen slightly below the long-term average. “Here too, delivery times of several months are not unusual,” commented Mudersbach.
There was also a slight drop in the volume of new business acquired through the leasing of office equipment and IT systems. In terms of acquisition costs, this segment generated 2.5 percent less business than in the preceding year. According to Mudersbach, this development was attributable to the well-documented decline in the price of the items being leased, and probably also to companies using their cash flows to finance investments in IT equipment.
The relative importance of the various classes of goods leased remained more or less unchanged. As already indicated, Road Vehicles remained the largest segment, and accounted for 64.1 percent of all new business. Next in order of importance came Production Machinery (12.2 percent), followed by Office Equipment and IT Systems (8.9 percent), Information and Signalling Systems & Other Equipment (7.1 percent), Business Properties, Office Buildings and Sales Premises (3.1 percent), and Production Buildings and Warehouses (2.8 percent). In last place (at 1.8 percent) came Aircraft, Watercraft and Rail Vehicles. In spite of its tail-end position in the market-value rankings, this segment generated almost twice as much new business as in 2009, thanks largely to a small number of big-ticket transactions.
Leasing Customers
The relative importance of the various customer groups has also changed little. The largest customer group remains the Service Sector, which has so far accounted for 33.9 percent of all new business transacted. The next largest source of new business is the Manufacturing Sector (22.5 percent). The volume of new business acquired from these two sectors this year has so far risen by 3.8 percent and 13.7 percent, respectively. In third and fourth places come Commerce (13.5 percent), and Transport & Telecoms (11.1 percent). There has been a renewed sharp fall in demand for leasing services amongst Private Households; this customer group accounted for just 6.0 percent of all new business. “Even if the lion’s share of our transactions is with commercial customers, the current extreme reluctance of private customers to sign up to leasing agreements is having a dampening effect,” observed the BDL President. “If private customers are taken out of the mix, we are left with an overall increase of 13.5 percent in new leasing business.”
In recent years, the Public Sector has been making increasing use of leasing, and this customer group has so far been responsible for 4.2 percent of all business transacted in 2010 (as compared with 2.8 percent in 2009). Agreements with the Agriculture, Forestry, Mining and Public Utilities sector have accounted for 2.8 percent of all new business in the current year, which is 45.7 percent more than in 2009. The figure for the Construction sector stands at 6.0 percent, which represents a year-on-year increase of 13.5 percent.