Interactive Q&A Sessions May Offer Clarity on Car Leasing Business amidst COVID-19 Pandemic
The coronavirus (COVID-19) pandemic is considered as one of the worst public health crises that the world is witnessing in present times. Similarly, the novel virus has sparked many questions in the minds of individuals who are willing to lease cars. Hence, Leasing.com-a U.K.-based car leasing services provider announced that the web shop is conducting its car leasing activities with the help of core staff keeping the business running and are working remotely.
Web shops in the car leasing market should introduce interactive coronavirus Q&A sessions or blogs to provide clarity about their business proceedings in the COVID-19 era. Companies in the car leasing market are creating emphasis on online finance and electronic paperwork to help break the chain of coronavirus.
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Business of Car Leasing Acquires Prominence in SMEs Due to Cost Saving
The business of car leasing is turning out to be an effective revenue model for various corporations worldwide. Apart from countries in North America and Europe, countries in Asia Pacific, such as India, is undergoing a change, owing to increased demand from CAs, doctors as well as SMEs (Small & Medium Enterprises). Expansion opportunities are contributing toward the overall growth of the car leasing market, which is expected to reach a revenue of ~US$ 1 Trn by the end of 2030.
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The emergence of private and business car leasing is eliminating the social stigma associated with a customer’s pride of owning a vehicle. Cost-efficiency advantages of car leasing is increasingly grabbing the attention of customers as well as SMEs. Apart from MNCs (Multinational Corporates), lessors in the car leasing market are shifting their focus toward SMEs, since leasing offers cost savings for SMEs who already function on limited capital.
Car Leasing versus Car Subscription: Which is better
The ever-evolving consumer buying decision processes are witnessing a shift from owning a vehicle to leasing and subscribing in recent years. The trend of car subscription is gaining popularity among the urban young middle class, as customers are shifting their focus from buying to experiencing new vehicle models as they enter the market. For instance, according to a recent report, automotive giants such as General Motors, BMW, and Porsche, among others, are entering the business of car subscription. However, car leasing offers advantages of paying a fixed monthly rental, without having to worry about the down payment.
Though car leasing eliminates the issues associated with resale, the typical lease tenure falls between three to four years, resulting in heavy penalties if the lessee prematurely terminates the contract. Hence, companies in the car leasing market should strategically target leasing and subscription services to customers, since changing consumer behavior is one of the strongest drivers influencing market growth.
Winning Imperatives: EVs and Digitization Trend Boost Market Growth
Various market drivers are triggering growth of the car leasing market. As such, OEMs are migrating toward electric vehicle (EV) leasing, since the rate of depreciation for EVs is much higher than that of traditional internal combustion engine counterparts. Moreover, car leasing saves customers from the hassles of resale value after owning vehicles. As such, car leasing in the EV sector opens a plethora of options for customers, since periodically new EV models are introduced in the market.
The trend of digitization is creating a huge impact in the car leasing market as well as the automotive industry. Companies in the car leasing market are leveraging their profit margins and enhancing consumer experience by investing in digitization technologies, such as blockchain. Likewise, lessors are adopting data analytics since an average connected car generates large GBs of data on an hourly basis. With the help of data, car operators can evaluate and develop strategies to enhance the experience of lessees.
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Car Leasing Market: Overview
- The global car leasing market is anticipated to expand at a CAGR of ~9% during the forecast period, owing to the rise in the demand for private lease
- Developed countries, such as the U.S., Germany, the U.K., and France, hold a key share of the global car leasing market. The market in developing countries, such as China, India, Mexico, and Brazil, is at a nascent stage, and it is expected to expand at a notable growth rate during the forecast period.
Drivers of Car Leasing Market
- Mobility-as-a-service is gaining popularity in the auto sector. Rise in the number of young consumers and demand for mobility among consumers with relatively low spending power are boosting the global car leasing market.
- Business and companies around the world are offering attractive benefits to their employees, such as car leasing, in order to attract and retain talent. Corporates are major end users of car leasing. Rising trend among corporates to be acknowledged as the “best-working space” is further driving the car leasing market.
- Increase in maintenance cost, taxes, and fuel cost associated with car ownership is prompting consumers to lease and use cars, which in turn is projected to boost the car leasing market
Challenges for Car Leasing Market
- The coronavirus pandemic is likely to cause a global recession with a high impact on the auto sector. Lower credit bearing capacity of banks and financial institutions is expected to negatively impact the roll-out of newer lease contracts, thereby restraining the car leasing market.
Challenges for Car Leasing Market
- Based on lease type, the global car leasing market has been classified into operating lease and financial lease. The financial lease segment held a leading share of the car leasing market in 2019. Financial lease is highly preferred in North America, China, & ANZ and subsequently, the segment held a significant share of the market in Europe. However, the car leasing trend is slowly shifting toward operating lease due to its robust model and evolving consumer preference toward car-as-a-service.
- Based on product type, the global car leasing market has been segregated into private lease and business lease. The business lease segment held a dominant share of the car leasing market in 2019, owing to the high usage of leased vehicles by corporates and SMEs. The private lease segment is expected to expand at a notable growth rate during the forecast period, owing to an increase in awareness about car leasing among consumers.
- In terms of provider, the car leasing market has been split into OEM/captives, commercial banks, and NBFCs. Commercial banks are traditional participants in auto leasing and finance and hence, the segment held a major share of the global car leasing market in 2019. However, captives and NBFCs segments are rapidly increasing their share in the global market and hence, the commercial banks segment is projected to lose share of the market by 2030.
Car Leasing Market: Regional Analysis
- Based on region, the global car leasing market has been divided into North America, Asia Pacific, Europe, Latin America, and Middle East & Africa
- In terms of volume, Europe led the global car leasing market in 2019, followed by Europe. Europe and North America, cumulatively, held a major share of the global car leasing market in 2019. Post 2009 economic recession, the credit environment started improving in these regions due to the entrance of captives and banks targeting customers with lower interest rates for lease. NBFCs and captives started penetrating the sub-prime sector, which in turn has fueled the car leasing market in Europe and North America.
- The market in Asia Pacific and Latin America is in the nascent phase, owing to lower penetration of car leasing among the total registrations. Increase in consumer awareness and cost of car ownership is anticipated to drive the car leasing market in developing regions. China and India are considered potential hubs for the automotive industry. Increase in penetration of leased cars in India and China is likely to boost the global car leasing market.
Car Leasing Market: Competition Landscape
- Key players operating in the global car leasing market include
- ORIX
- ALD Automotive
- Avis Budget Group
- Sixt
- Enterprise
- Hertz
- Arval
- Leaseplan
- Europcar
- Movida
- CAR Inc
- Daimler Financial Services
- General Motor Financial Company
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