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Car Leasing Companies On The Rise: A Growing Trend To Challenging Ownership

A recent research study conducted by Technavio on the global car leasing market predicts that the market will post a CAGR (Compound Annual Growth Rate) of close to 14% from 2019 to 2023.

The report states that North America and Europe held the highest share of the market in 2018, which is soon to be surpassed by the Asia-Pacific market, with China, India, Indonesia and Japan leading it.

According to the White Clarke Group, who published the Global Leasing Report in 2018, the top 50 leasing markets had shown a new business volume growth of 9.4% to reach $1100bn in 2016. Three regions, namely North America, Europe and Asia, accounted for more than 95% of the global volume.

Europe recorded a growth of 7.3% whereas North America had a growth of 2.2% over the previous year. In Europe, the UK, Germany, France, Sweden and Italy accounted for 65% of the market, and Europe alone contributed to 31.5% of the global market.

The United Kingdom and Germany accounted for 13% of the global market and 42% of the European market, and are ranked as the third and fourth largest leasing markets in the world. The UK continues to forge ahead in the vehicle leasing space, despite the uncertainty surrounding the outcome of current political and financial discussions regarding Brexit.

Martin Brown, Managing Director of car leasing company Intelligent Car Leasing, has outlined this clearly when stating that “promising growth has seen an expansion in our workforce and a refined focus as we approach 2020. We’ve felt little evidence of slow down, providing optimism that 2020 and beyond will usher in even stronger growth in the car leasing space in the UK market.’

Moving East, there has been postulation of growth rates in Asian markets as high as 30% over the last year, with this being the largest percentage increase among all the markets. In Asia, China has recorded a staggering growth of 61%, showing the massive scope of leasing businesses in this region.

According to Technavio, the use of telematics by car leasing companies will have a positive impact on North America and Europe markets and will contribute to the rapid growth. Telematics collects data related to distances travelled, letting car leasing companies send useful information to the lessee, such as a notification in case they exceed the mileage agreed by the contract, methods to improve fuel efficiency, etc and it comes in handy in case of theft or an accident.

In the Asia-Pacific region, increasing vehicle costs, interest rates and hassles associated with maintenance are cites as the top trends that are driving people towards car leasing.

Some of the other top reasons why the market is showing significant growth are detailed below:

Rising Eco-consciousness

As many people are becoming eco-conscious and reducing personal carbon footprints, the demand for EVs is increasing. Many choose EVs over ICEs already, and those who want to purchase an EV will turn to leasing them for mainly two reasons: one, they depreciate faster than ICEs, and two, leasing will let them change their EV models more often.

Since EVs depreciate faster, leasing one will let customers avoid the issues related to low resale value and the hassles related to leasing a car are much fewer compared to owning a car.

Benefits of Leasing over Owning

The benefits of leasing over buying a car is a major driving force to the growth of the market, and ties into a greater macroeconomic trend of access over ownership. When leasing, the customer has a lot of flexibility. Monthly payments are lower, most of the repairs are covered under warranty and the sales tax greatly reduced. Most importantly, lessees can change the car after two or three years when the term ends and, if they don’t want to return the car, some leasing companies offer purchase options also with different lease contracts.

In the global market, private leasing dealerships are receiving a boost from a population which prefers the easy, hassle-free usage and fixed mobility costs.

Used car leasing

Used cars are now big business for the leasing industry, with an estimated addressable market of 12 million units. Most of the leasing companies are already active in the business and is expected to grow further in the coming years.

Although questions persist over whether used cars will experience maintenance issues more often, leasing companies guarantee that it will not be a problem and that cars have a fantastic service record. Given that all lease cars require regular servicing and maintenance as part of their contracts, it’s likely that they are serviced often and faulty parts are regularly replaced.

SME Leasing

As the leasing industry is getting congested, it has started to focus on SMEs (Small and Medium Enterprises). SME leasing offers a huge potential of 27 million cars and leasing companies have started to invest in leasing solutions that target SMEs. Leasing companies are expected to target SME customers aggressively in the coming years.

Melissa Thompson writes about a wide range of topics, revealing interesting things we didn’t know before. She is a freelance USA Today producer, and a Technorati contributor.