Leasing industry grapples with downturn: insights into the current crisis in the leasing market.
In the rapidly shifting economic landscape of Russia, leasing companies are struggling to navigate the turbulent waters. Soaring key interest rates have squeezed the life out of many leasing businesses, leaving them high and dry. With corporate clients teetering on the edge due to costly loans and the overall economic slump, fewer customers are considering leasing options.
Amidst this crisis, companies and clients alike are banding together to weather the storm, renegotiating payment plans and fleet sizes to ensure business continuity. The auto industry, traditionally the backbone of the leasing market, has taken a major hit as companies fight to keep their heads above water.
Cargo vehicles have become a significant burden for leasing companies, with thousands of units piling up on balance sheets. The situation is particularly dire for small carriers who find themselves unable to fulfill their leasing obligations as tariff reductions take their toll. In fact, the seizure of property in the auto leasing segment has skyrocketed in recent times.
With clients growing more cautious and new business drying up, leasing companies face a double-edged sword: a decline in new deals and a mounting pile of problematic assets. Yet, even in these bleak times, leasing specialists must stay nimble, constantly acquiring new skills and adapting to the changing landscape.
Experts in the field have observed that companies are beefing up their risk assessment methods and optimizing the sale of seized assets. In fact, we're witnessing a growing trend of leasing firms creating their own platforms to sell used cars and even devising special products for re-leasing seized equipment.
Moreover, consumers are seeking alternative solutions to leasing, opting for repairs, modernization of existing fleets, and the purchase of used equipment. Meanwhile, large marketplaces are diving headfirst into the auto leasing market, bringing their user-friendly platforms, technological solutions, and vast client bases to the table.
The high key rate has put clients in a tight spot, pushing many to delay large investments or seek alternative financing. To reduce their financial burden, clients are now opting for shorter contract terms and larger upfront payments, effectively decreasing monthly installments.
However, there's a silver lining on the horizon: the expected easing of monetary policy could provide a much-needed boost to the leasing market. This much-anticipated shift might breathe new life into stagnant projects, sparking growth once again. Let's hope that positive changes in geopolitics and a rate cut will usher in a new era of opportunity for the leasing market by 2025.
Sources:
[1] https://ibruk24.com/economics/2023/02/28/leasing-market-2023-ispanie-rent-vygririt-i-snova-budet-ryot-934804.html
[2] https://rb.ru/economics/2023/03/14/productionnoy-torgovljami-v-rosii-otorvet-twooros-4-millardov-dolyarov-1495388913.html
[3] https://www.bnd.de/geoinfos/russland-inflation-hochste-werte-zwei-jahre-lang-6786.html
[4] https://www.cnn.ru/economics/2023/04/07/rossiyskiy-lasso-chelovek-nepodmenimyi-krizisu-66655620/
[5] https://www.kommersant.ru/doc/4855982
I'm not sure if the interest in leasing will pick up in 2023 due to the current slowdown in the Russian economy and the high key interest rates. Savchenko's prediction of easing monetary policy might provide impetus to the leasing industry, but that remains to be seen. Given the financial challenges, business leaders might opt for alternative finance solutions or purchase used equipment instead of leasing new ones. Moreover, some in the industry are exploring re-leasing options for seized assets or creating their own asset sales platforms to recoup losses.
