Leasing with mileage – Newspaper Kommersant No. 185 (7386) dated 10/06/2022
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In conditions of shortage of machinery and equipment, leasing companies have to learn how to work with the segment of used vehicles. This is a risky segment that insurance companies do not always want to work with. In addition, companies are facing a shortage of high-quality equipment and growing competition from the car loan segment, which continues to increase the share of used cars.
As follows from the Expert RA study, which Kommersant got acquainted with, in the first half of 2022, 70% of leasing companies increased their work with used equipment.
Thus, the share of used items leasing in the new business has increased from 14% to 20% since the beginning of the year.
This trend was the result of a shortage of leasing items on the market after some manufacturers of popular brands left the Russian market amid sanctions (see Kommersant of May 28), the authors of the study explain.
Leasing companies themselves confirm the growth of used leased items in new business, even those who started working in this segment only in 2022 are sure that this is a long-term trend. Thus, according to Anatoly Torokhov, commercial director for leasing for small businesses at Rosbank Leasing, by the end of the year, used objects will account for up to 25% of the total financing volume. Although used property is a more risky segment of the portfolio, Dmitry Kudryavtsev, Deputy Director for Risks at Alfa-Leasing Group, admits.
“If earlier the purchase of used equipment was a means of saving, now it is considered as a business decision against the backdrop of a shortage of new equipment,” says Anatoly Perfilyev, junior director for banking ratings at the Expert RA agency. The main difficulty in working in this segment is that the lessor must conduct an appraisal examination for the possibility of operating the equipment. Also, the insurance of such property and the cost of the leasing services themselves can cost more to the lessee, the expert notes. Insurance companies do not always want to work with used property, which is now the bottleneck in financing the segment, Dmitry Kudryavtsev confirms.
However, some companies have strict restrictions on this. For example, in Europlan, the maximum age of the leased asset at the end of the lease term should not exceed 10 years. In VTB Leasing, the age should not exceed 6-12 years, depending on the category of the vehicle and the country of its production, Vyacheslav Mikhailov, head of the auto leasing business development department, cites the data.
Used equipment will be most in demand where there is a shortage of equipment and, at the same time, demand for it is most noticeable, Suren Asaturov, Deputy Director of the ACRA Financial Institutions Ratings Group, believes.
“First of all, we are talking about trucks and cars. The need for cargo transportation is not decreasing, which cannot be said about the supply of tractors, and taxi companies and carsharing continue to be an indispensable part of life. Perhaps the latter will soften the requirements for the period and quality of operation of machines, fueling the development of the used segment. It is quite possible that at some point the standards for the period and quality of operation, the concept of comfort classes and other features associated with tariffs can be revised, ”the expert believes. In addition, these are related segments with car loans, which are also turning towards used cars. Competition between banks and leasing companies in the face of their deficit will grow, Mr. Asaturov warns. The leasing market is already facing a shortage of quality used equipment, its participants confirm.
Another criterion for the organic introduction of used leasing will be the life of the facility. This means that railway transport, aviation, sea and river vessels can stimulate the development of this segment, Suren Asaturov lists. It all depends on the subject of leasing and its liquidity in the secondary market, explains Maxim Kalinkin, vice president of GPB Bank, CEO of GPB Leasing. “A sea vessel aged 20–30 years will fully pay for itself and continue to work for the shipowner, since the leasing period in this case is 7–10 years. The same situation with the railway park. It is highly liquid, since its service life reaches 30 years,” the expert notes. That is, a client can safely acquire a 10–15-year-old park on a leasing basis, since its operation period exceeds the leasing period. The average lease term for rolling stock is 7–10 years, as for ships. “In fact, the leasing business with used vehicles can be successful with any of its types, the issue is industry restrictions, transportation safety and other factors,” Mr. Kalinkin summed up.
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