Roland Brändli, president of Schweizerischer Leasingverband SLV / Association Suisse des Sociétés de Leasing ASSL, offers a review of the Swiss leasing environment over the last couple of years. This report by theWhite
Clarke Group.
The leasing sector in Switzerland has been extremely positive in terms of new business transactions over the last few years, growing by 4% per annum on average between 2014 and 2018 (based on figures from the Swiss leasing association, Schweizerischer Leasingverband SLV / Association Suisse des Sociétés de Leasing ASSL). Consumer leasing and investment goods leasing greatly contributed to this.
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In contrast, fleet leasing stagnated. Swiss banks were dominant with a share of 46% as well as captives with a share of 42%. Contract volume of SLV association members grew to CHF22.37bn up till the end of 2018. Further growth will depend heavily on economic growth.
According to estimates, the statistics of the Swiss Leasing Association cover just under 80% of the whole Swiss leasing market. According to these statistics, the contract volume is likely to be around CHF27.5bn.
Digital transformation
The industry has been putting a lot of focus on digital transformation to future-proof leasing businesses, an issue considered ever more important since the start of the pandemic. Digital transformation is affecting all sectors of the Swiss economy, calling into question not only existing business strategies and corporate structures but also specific business processes.
The SLV set up various projects influenced by the Industrial Revolution 4.0 and the Internet of Things (IoT), in an effort to keep the sector up-to-date. On the one hand, SLV focused on further developing and monitoring already identified trends such as servitisation, pay-per-use, the sharing economy and subscription models, preparing a clear infographic for each trending topic and agreeing on a concrete package of measures.
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By GlobalDataOn the other hand, the SLV devoted itself to another interesting development from the perspective of the leasing industry: many customers, whether they be consumers or business people, are increasingly demanding the transfer of rights of use for items and their re-utilisation.
The advantages that the transformation to a circular economy will bring to Swiss leasing are of both an economic and ecological nature. SLV is convinced that leasing is ideal for implementing business ideas involving the transfer of rights of use for consumer and investment goods and their re-utilisation. Therefore, it has set itself the goal of supporting the implementation of such business ideas and started the search for a suitable “lighthouse project”.
Consumer leasing
In 2018, new registrations of passenger cars fell by 4.6% or 14,312 units. The decline took place above all in the second half of 2018. This was undoubtedly due to the change in exhaust and fuel consumption tests to the new Worldwide Harmonised Light Vehicles Test Procedure (WLTP), which led to huge supply delays by some manufacturers.
Under the circumstances, one can say it was a difficult, yet successful year for car sales. The consumer leasing volume increased, which is a positive development.
New contracts in Swiss francs increased by 11.2% and in terms of contract volume by 9.2%. The growth in the number of new transactions was more modest with 7.4% and the number in the portfolio by 3.4%. These figures confirm that higher financing amounts could be realised for passenger cars.
Consumers represent the largest customer segment of leasing companies, with 44.8% (CHF4,871bn) of new contracts and 39.9% (CHF8,923bn) of the contract volume attributable to this customer group, representing another increase. This shows the popularity of leasing among private individuals continues to increase, despite new forms of vehicle ownership or mobility.
Forms of mobility and ownership are also evolving rapidly in Switzerland. The Swiss Federal Railways launched a travel package in 2018 that combined different modes of transport, for example e-bikes, e-cars and car-sharing with an annual train pass.
Subscription models for car use from companies such as Carvolution and Upto, which combine an all-in-one solution with a very short fixed-term and then a short notice period or the option of switching to another vehicle, are also on the market.
In addition, there are sharing offers, eg. from Sharoo, which are aimed at consumers who no longer wish to own their own vehicle. It will be interesting to see how these forms of mobility spread in the marketplace and what kind of influence they have on the share of consumer leasing.
Fleet leasing
2018 was marked by two major developments which had a significant impact on the performance of fleet leasing. The recent emissions scandal has not only led the industry to occupy itself with topics such as the WLTP, the standard measuring method for exhaust emissions.
The demand for sustainable and alternative drive systems also steadily increased. This trend can also particularly be observed in the area of large corporate fleets. In parallel with the proliferation of electric, hybrid and plug-in vehicles, the network of smart charging stations is constantly evolving. Interest in gas-powered vehicles is also growing.
A growing need for flexible mobility models could also be observed.
Constantly shifting market conditions mean that companies must demonstrate a willingness to change, including in the realm of mobility needs.
Hence, interest in integrative mobility concepts, short-term rental models and convertible contract terms is growing.
The change in the field of fleet leasing is interesting. On the one hand, around 65.9% of all newly concluded lease contracts for vehicle fleets were concluded in 2018 in the form of full-service leasing contracts (financing and management).
This figure rose by 3.8% compared to the previous year. On the other hand, pure finance leasing for fleets recorded a decline in new business from 38.5% in 2015 to 34.1% in 2018.
The total number of full-service leasing vehicles in fleet leasing has also increased; here we see an increase of 71.5% in 2017 to 73.4% in 2018. In contrast, the number of leased vehicles with pure finance leases fell by 1.9%.
It is also worth mentioning that in 2018, 94.6% of the vehicles acquired in fleet leasing were new vehicles and only 5.4% were second-hand cars.
Investment prosperity
The healthy Swiss economy continued in 2018. In terms of exchange rates, the euro fell slightly against the Swiss franc over the year, whereas the US dollar, for example, remained stable as a key trading currency. Investment propensity remained good overall.
In the industry, business growth in newly concluded leasing transactions was well above the growth of the national economy, while growth in the area of services was somewhat weaker.
Interest rates remained at a very low and therefore attractive level. As a result of the generally good development of companies, the earnings position of many customers was good to very good, which led to a positive liquidity situation overall. Demand for flexible leasing solutions (buzzword ‘pay-as-you earn’) grew. The importance of digital channels to be able to offer efficient and customer-friendly services is continuing to increase. Towards the end of the financial year uncertainty on the financial markets rose, which resulted in a certain reluctance on the part of our customers to make investments.
Roland Brändli is president of Schweizerischer Leasingverband SLV / Association Suisse des Sociétés de Leasing ASSL. This is an edited version of a report that first appeared in White Clarke Group’s World Leasing Yearbook 2020.
Ranked 13th in the world
According to the White Clarke Global Leasing Report 2020, which ranks countries by leasing volume, Switzerland was ranked 13th (compared to neighbours Germany 4th, France 6th, Italy 7th and Austria 18th). Citing figures for 2018, White Clarke Group reported that total new leasing business in Switzerland was $13.49bn (with growth up 8% on the previous year). White Clarke sourced its figures from Leaseurope. Source: White Clarke Global Leasing Report 2020
Key data at a glance
IMF REVISED REAL GDP GROWTH PROJECTIONS (DUE TO COVID-19)
2020 -6.0%,
2021 3.8%
Source: IMF World Economic Outlook: The Great Lockdown, published April 2020
GDP per capita (pre COVID-19)
$70,986
Source: OECD, 2019 ($USD)
