Market overview in 2019 and outlook for 2020
Every year, Leaseurope, the trade association representing the European leasing and automotive rental industries, provides a market overview based on its data collected through the regular statistical surveys in cooperation with the members of the Federation. These figures show that, although experiencing some moderation of growth in 2019 compared to the previous year, the European leasing market has been notably expanding in new volumes since 2014. This positive trend, however, was interrupted by the severe impact of the COVID-19 pandemic striking in early 2020, which inevitably dimmed prospects for the leasing business seeing another year of growth.
Albeit at slower pace, continued growth in 2019
The 2019 Annual Statistical Enquiry showed that total new leasing volumes in Europe reached €415.0 billion in 2019, increasing by 6.0% compared to 2018. Many countries taking part in this survey enjoyed positive results, except Italy, Portugal as well as part of the markets in the CEE and the Baltic clusters. Importantly, the major leasing sectors, including automotive, machinery and industrial equipment, as well as computers and business machines, strengthened in performance contributing to the leasing market growth across the board.
The automotive sector performed well in 2019, with new leasing volumes for passenger cars rising by 6.6% and for commercial vehicles by 7.6%. The machinery and industrial equipment segment also enjoyed another year of growth, expanding by 3.3%. Likewise, the leasing of computers and business machines increased by 3.8%. Another growth area was the leasing of real estate, which saw an improvement in new volumes, growing by 8.6% in 2019 to reach €15.8 billion.
The impact of Covid-19 on results in H1 2020 and beyond
Heading into 2020, these generally positive dynamics and prospects for another year of growth were quickly dimmed by the onset of the COVID-19 pandemic in early March. The global economic activity plunged into an unprecedented recession in the first half of the year, according to the European economic forecast, going along with severe social consequences. On that note, national economic and fiscal support measures across the EU countries as well as ongoing favourable market-funding conditions have cushioned the economic impact of the pandemic on businesses and households.
The European leasing and automotive rental industry were not exempt from the general downturn. As the results of the Leaseurope’s 2020 Biannual Statistical Survey reveal, during the first half of 2020, the European leasing market underwent a downturn across all the major asset categories. Total leasing volumes in the first half of 2020 were €125.6 billion, lower by 24.1% than the same period of 2019. Vehicle and equipment leasing contracted by 27.8% and 17.1%, respectively. Similarly, real estate leasing saw a decrease of 30.1% in new volumes in the first half of 2020. The downturn in leasing business was widespread across European countries.
In the second quarter of 2020, the industry saw most of the KPIs considerably deteriorated compared to the same period a year ago, except for the cost/income ratio remaining relatively stable. The portfolio of outstanding contracts continued to expand despite a large drop in new business, and lessors have responded rapidly to the crisis by lowering costs and taking very conservative positions on loan loss provisions to reflect the highly uncertain economic environment, according to the Leaseurope Index, a quarterly Leaseurope survey of European leasing firms.
Projections for tor the rest of 2020 and the coming year are subject to an extremely high degree of uncertainty and risks surrounding demand, weighting on investment decisions, as well as very much dependant on the EU determination to roll out its landmark recovery package to chart the course to economic recovery. Meanwhile, European lessors will continue leveraging their strengths to provide much needed asset financing to facilitate business recovery, particularly for SMEs that have been showing an increasing demand for leasing to the time when the pandemic hit. Importantly, lessors’ flexibility helps customers remain afloat, likely preventing a more severe downturn.