Paul Golden looks back at leasing in 2019 and talks to some industry stalwarts about how they have been managing during the pandemic.
The Austrian leasing industry started 2020 in a strong position, having just recorded another record year, contributing to an annual average growth rate of 7% over a four-year period, that was before Covid-19 hit these shores.
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Data, for full-year 2019, from the Austrian leasing association (Verband Österreichischer Leasing or VÖL) showed new business volumes rose by 12.5% to €8.6bn on the back of significant growth in vehicle leasing (up by 18.8% compared with 2018) and real estate leasing, which increased by 10.6% from the previous 12-month period.
Vehicle leasing remained the dominant segment of the market, accounting for just over three-quarters of new business in a country where every second vehicle is financed with leasing. New car leasing business amounted to €6.5bn across 242,000 new contracts, an increase of 12.2% over the previous year. The average contract amount went up by 5.9% from €25,500 to €27,000.
Volumes rose in both the corporate (+12.5%) and consumer (+11.3%) segments and the fleet management sector was even more buoyant, recording a 14.4% increase in value to €989m.
The number of contracts signed in the fleet management segment increased to more than 126,000 units – a rise of 5.9% from the 2018 total – which means that around 60% of all company cars are now financed by leasing. More than 101,000 of these contracts were for full-service leasing.
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By GlobalDataEquipment leasing
The results for the equipment leasing segment of the market were more mixed. While the number of new movables leasing contracts rose by 8.8% to 23,841, the average contract size dropped by 15.1% to €65,283. This led to a decline in the volume of new business of 7.6% to €1.6bn, mainly as a result of a fall of almost 40% in leasing of air, rail and water transport equipment.
In the real estate leasing sector, domestic leasing companies again achieved double-digit growth in 2019 (+10.6%) and recorded new business volumes of €467m. The average contract amount rose by more than a quarter.
Wolfgang Steinmann, secretary-general of the VÖL noted that leasing had become particularly popular for financing technological investments to improve environmental sustainability in areas such as wind power, solar energy and biomass as well as district heating systems and combined heat and power facilities for residential properties, schools and public buildings.
With an established track record of financing and advising domestic drivers on the purchase of environmentally friendly vehicles, he described leasing companies in Austria as e-mobility pioneers who, with their specialist knowledge, would continue to be the first point of contact for companies and private customers in the ‘green finance’ space.
Of course, 2020 has proved to be a much tougher period for lease companies in Austria.
“As the leasing business mirrors the general economy we currently see a higher degree of uncertainty in our industry,“ acknowledges Alexander Schmidecker, chief executive of Raiffeisen-Leasing. “So far, however, we have mastered the crisis pretty well as companies and private individuals appreciate leasing for its flexibility and equity friendly approach.”
He says his company’s ‘full range leasing’ strategy – which enables it to provide a range of leasing services to private individuals, corporate clients and public institutions – has helped it stay on track.
“Following the outbreak of coronavirus, Raiffeisen-Leasing offered its customers the opportunity to defer their leasing payments for up to six months,” says Schmidecker. “We have been able to support our clients during these challenging times and our corporate clients, in particular, appreciate this hands-on approach.”
The lockdown period has also helped the company accelerate and promote its virtual services. In addition to on-site, personal visits, it now supports vendors and colleagues in Raiffeisenbank branches all over Austria with video calls and training.
Aside from coronavirus, he describes ongoing digitisation as the most significant development in the Austrian lease market over the last 18 months.
“As a result of lockdown we have seen a boom in the use of online services and online tools,” says Schmidecker. “More and more customers use online banking and appreciate the opportunity to also access their leasing contracts through their online Raiffeisen finance portal.”
The company also offers an online leasing calculator that provides customers with a personalised leasing offer. Customers can sign their leasing contract online using a video identification process and fleet management customers are supported by an app that allows them to hand in receipts or schedule appointments with the nearest car repair shop.
“We currently see a healthy level of interest in lease solutions,” he continues. “During this crisis, liquidity is crucial for most companies and leasing is hence a very attractive way to finance urgently needed investments. Real estate financing and private-public-partnership projects for large infrastructure projects are still in high demand.”
Raiffeisen WohnBau, Raiffeisen-Leasing’s real estate development firm, is currently working on 25 residential building projects with a total project volume of €300m. The market for condominiums in good locations continues to show healthy growth and given the current market uncertainties real estate remains a popular investment choice for private individuals.
Another interesting area within car leasing is the strong focus on electric vehicles. The Austrian government is strongly promoting the reduction of traditional combustion engines and supporting more eco-friendly alternatives. Both private individuals and companies can currently benefit from cash bonuses when they switch to more eco-friendly vehicles.
“As a leasing company we strongly support this trend and offer our customers comprehensive advice and attractive leasing rates,” says Schmidecker.
Raiffeisen-Leasing enjoyed a record year in 2019 with 20,500 new leasing contracts signed with a total volume of €890m. But when asked for his outlook for the lease market over the remainder of 2020 and into 2021, the company’s chief executive admits that it is very difficult to predict how the market will perform.
“In general I am optimistic, because leasing is a flexible and equity friendly form of financing,” says Schmidecker. “But when companies go out of business and people lose their jobs it is only a matter of time before they start terminating their leasing contracts. We hope for the best and focus on how we can further develop our product range, online services and tools.”
While observing that the present economic conditions represent a challenge which nobody expected just a few months ago, Katharina Häusler, managing director of Grenke Austria says the situation has led to a rethink in many companies.
“This means, for example, the conversion to mobile workplaces and remote work solutions, which can increasingly be financed by state investment grants,” she says. “This could also have a positive impact on our business, as we are very strong in this segment.”
According to Häusler, leasing companies in Austria have reacted quickly to the current situation and offered their customers and partners support – not only in the form of deferrals, but also the opportunity to generate liquid funds for the continued existence of the companies.
“The main challenge in the current pandemic situation is to support our customers and resellers and limit their risk by maintaining cash flow and safeguard liquidity.”
She describes Austria has having a strong and stable economic situation characterised by digitisation.
“Even if the opinion is still often expressed that leasing is only an option if the asset is not affordable, a rethink has taken place in recent years with entrepreneurs choosing leasing to react flexibly to market changes and take advantage of additional services,” she says.
“The demand for a full-service package is becoming more and more important as this means that the focus is no longer on ownership but on the flexible use of the asset. Increased digitisation will be even more significant over the remainder of this year and into 2021 and this is where we can support our customers through digital sales applications, e-signatures and online portals.”
On the question of whether there are any specific sectors of the lease market that are particularly strong or weak, Häusler notes that due to the efforts of digitisation in both the private and public sectors there is a growing demand for products that support this development.
“Both 2020 and 2021 will be years of challenges,” she adds. “The situation caused by coronavirus is an opportunity for change and transformation for all companies. There is a rethinking of the way business is done and especially in times like this companies need a strong ally.”
A spokesperson for BNP Paribas Leasing Solutions Austria observes that the company experienced a positive first quarter of 2020 before lockdown in May and June.
“With July looking a lot more positive again, we expect investment activity to pick up allowing us to partially recoup by the end of 2020,” she says.
“However, the concrete impact of the investment bonus and other economic governmental measures can at present not be assessed.”
Challenging times
BNP Paribas experienced the biggest impact on its lease business in the office and telecommunications equipment segment as offices were in lockdown. “By contrast, the IT, agricultural and construction sectors were resilient,” she adds. “As with every bank, we have also received a number of preventive rescheduling requests.”
Despite the ongoing challenging circumstances, the Austrian leasing market is a very healthy one with the potential to further increase its overall market share compared to some western European countries and the US.
That is the view of Karin Schmidt-Mitscher, managing director of Erste Bank und Sparkassen Leasing, who shares the view that the country’s lease companies have taken a constructive approach to the changes imposed by coronavirus.
“Austrian leasing companies have managed the liquidity topics connected with the Covid-19 crisis very well,” she says. “Especially in such tough times, leasing is being used for the financing of necessary investments to better balance liquidity.”
Aside from coronavirus, Schmidt-Mitscher observes that the growing leasing share in the passenger car segment is partly compensating for stagnating new registrations. She also notes that smaller financing arrangements for consumer goods such as iPhones and e-bikes are growing in popularity, as is fleet management, while online processes and completions are becoming more and more important.
“We have seen a discernible trend towards flat rates or flexible instalments,” she continues. “In addition, there is also clear ongoing growth in the role of fleet management and especially of connected services.”
Schmidt-Mitscher maintains a positive view of the likely development of the sector over the next 18 months, observing that especially in economically challenging times leasing provides the best solution for firms seeking to balance liquidity.
“It is also proving itself to be a perfect instrument for financing technological and sustainable investments,” she adds. “The leasing industry is an engine for European businesses – particularly SMEs – in that it provides them with access to essential equipment such as fleet cars, delivery trucks, computers and printers, manufacturing machines, and agricultural equipment.
Key data at a glance
IMF REVISED REAL GDP GROWTH PROJECTIONS (DUE TO COVID-19)
2020 -7.0%,
2021 4.5%
Source: IMF World Economic Outlook: The Great Lockdown, published April 2020
GDP per capita (pre COVID-19)
$59,120
Source: OECD, 2019 ($USD)
Ranked 18th in the world
According to the White Clarke Global Leasing Report 2020, which ranks countries by leasing volume, Austria was ranked 18th (compared to neighbours Czech Republic 23th, Slovakia 31th, Slovenia 35th, Germany 4th and Hungary 30th).
Citing figures for 2018, White Clarke Group reported that total new leasing business in Austria was $9.36bn (with growth up 10.8% on the previous year). White Clarke sourced its figures from Leaseurope.
Source: White Clarke Global Leasing Report 2020
Austria: leasing in the wake of the pandemic
