What's Next for Leasing and Equipment Finance? A Market Recap.
World Leasing Review Spring 2021 edition refers to a generally positive, but dynamic outlook on the global leasing and equipment finance market as Covid-19 took the world by storm from the first quarter in 2020.
2020 was an undoubtedly challenging year for our financial markets and economies, as the novel Covid-19 virus swept our world into new uncertainties faced with the pandemic. When we were expecting a sprint in Q1 of 2020, our new “normal” became a long race that weakened many annual financial ratios significantly.
Despite last year’s market fluctuations and challenges, the leasing and equipment finance industry overall remained a strong and central player for companies at the core of the economy, with one aspect in common: the financing of essential assets to society. From industrial machinery and construction vehicles, to software, hardware and cloud-based solutions enabling the financing of assets - such investments remained a key priority for the economic rebound of business and society.
While the problem is global, conditions remains varied and localised
World Leasing Review reports that the overall market performance for leasing and equipment finance varied vastly from sector to sector and remain heavily based on local market conditions with regards to vaccination progress and re-opening of society. Some areas of the industry experienced sharp financial impacts, while other sectors experienced growing figures.
According to the Q4 index results from Leaseurope, the total new leasing volumes reported in Q4 2020 for European sectors dropped by -4.2% when compared to the same quarter of the previous year. At the same time, the whole of 2020 experienced a decline of -12.1%, reaching nearly €100bn in new business conducted.
The UK on the other hand reported an overall growth in new business, primarily leasing and hire purchase, by 1% in February 2021 compared to the same month in 2020. The machinery and commercial vehicle finance sectors also reported a rise in new business in February 2021 by 14% and 8%, compared to 2020, according to the Finance & Leasing Association (FLA).
By contrast, the FLA also reported a fall in the UK within the IT equipment finance and business equipment finance sectors by -20% and -24%, as well as declines in new business volumes in the consumer car finance market of -27% in February 2021, compared with the same month in 2020.
Market performance has ultimately fluctuated from country to country and dependent on sector, based on the pace of lockdowns and reopening of society.
Conversely, China and the US were among the countries leading a stronger rebound for software investment and new business in leasing in 2021.
According to the Equipment Leasing & Finance Foundation, the US annual equipment and software investment growth is expected to reach to 11.2% for 2021 as businesses invest to adapt to a new post-pandemic normal. US Leasing confidence also reportedly reached a three-year high ranking to 67.7 in March 2021, an increase from the February index of 64.4 - the highest level recorded since April 2018.
Foundations for future growth
Tim Albertsen, Group CEO at ALD Automotive, commented that “While 2020 presented significant challenges for businesses across Europe, the leasing industry showed remarkable resilience in funding assets essential to support the European economy. Particularly, European lessors have managed to stabilise operating expenses, with their income and portfolio experiencing only single-digit declines.” Deutsche Leasing also forecasted a positive upturn in business for 2021.
Europe leads the electric vehicle revolution
In other news, the Netherlands, Norway and the UK were reported as the top three countries best prepared for the electric vehicle revolution, and the overall entirety of Europe is more ready than ever for the impending transformation. Electric vehicles are quickly becoming a preferred option among consumers, as it provides competitive benefit of affordability, less risk and environmental sustainability. Contrarily, charging infrastructure is reportedly still lagging, according to LeasePlan’s 2021 EV Readiness Index.
Banqsoft is a leading provider of financial software solutions for asset finance, digital banking and credit management companies in the Nordics, offering future-proof systems in order to help auto finance companies stay ahead of the market. From end-to-end standardization and highly automated customizable platforms and processes, Banqsoft has the insight and technology to keep your finance company up to speed throughout future market changes and innovations.
World Leasing Review is a publication of World Leasing Yearbook, which is an internationally recognized reference source for the leasing and asset finance industries. World Leasing Yearbook is the only guide which covers all the world's leasing and asset financing markets into one volume, featuring over 50 country reviews written by the top industry players in the market. The publication covers all leasing sectors with core data for each country with market analysis and projections. For more information, visit https://www.world-leasing-yearbook.com.
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