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INTRODUCTION OF HIGHER REGISTRATION FEES FOR CARS AFFECTED THE MARKET

Leasing market sees little growth

THE SLOVAK leasing market, which was hit hard by the economic crisis in 2009, saw little growth in 2012 and is only slowly returning to its pre-crisis level. Expectations for 2013 are not very optimistic, with leasing companies pointing to the heavier burden of income and payroll taxes on business clients as well as the effect of higher registration fees for new cars in Slovakia.

THE SLOVAK leasing market, which was hit hard by the economic crisis in 2009, saw little growth in 2012 and is only slowly returning to its pre-crisis level. Expectations for 2013 are not very optimistic, with leasing companies pointing to the heavier burden of income and payroll taxes on business clients as well as the effect of higher registration fees for new cars in Slovakia.

“Even though the general leasing market stagnated last year, it pleases us [to report] that all so-called standard items, in which we rank cars, trucks, machinery and equipment, reported single-digit growth,” Marián Tibenský, the secretary-general of the Association of Leasing Companies of the Slovak Republic (ALS SR) said in his assessment of 2012. “We registered negative development, though quite significant, only in financing of items making up smaller portions of the market like real estate and equipment for renewable energy generation, in which we rank especially projects in the photovoltaic and biomass sector.”

The association expected this development because the photovoltaic and biomass sector increased significantly in 2011 and from the viewpoint of the long-term structure of the leasing market 2012 represented a return to the norm. But the association registered an increase in financing of the purchase of cars via leasing contracts after a decline from previous years.

In 2012 the aggregate purchase price of items financed via ALS SR members amounted to €1.84 billion, exactly the same as in 2011. But the association reported a positive trend in the latter part of the year, after the market initially shrank by 2 percent year-on-year during the first nine months. The number of new contracts increased over the whole year by 10 percent to 73,369.

Passenger cars remained the main item which leasing contracts were used to finance; the volume of contracts in this area increased by 9 percent to €833 million. The increase was fuelled by growth in leasing of used cars, which grew by more than 25 percent to €206 million. The new-car segment increased by only 4 percent to €627 million, which the association put down to stagnating activity by entrepreneurs.

“Thus total financing of cars for businesses increased by only 4 percent to €591 million, while contracts numbered almost 30,000,” said Tibenský.

The development of the motor vehicle sector was affected by the introduction of new registration fees. The increased fees, the maximum level of which rose to almost ten-fold the previous amount, became valid in October last year. The hike boosted sales of cars, especially those with bigger engines, in the run-up to the new fees coming into force. Higher sales also boosted the number of deals involving leasing companies.

The fee that motorists pay to register a new car or an imported second-hand car varies according to the vehicle’s type and the power of its engine. While all cars used to pay a €33 fee, from October 2012 that fee increased for cars whose engine produces 80kW or more.

For personal cars, utility vehicles and motorcycles with an engine producing between 80kW and 86kW the registration fee increased to €167. The fee then rises in line with the performance of the vehicle’s engine up to a maximum of €2,997 for cars with more than 254kW. Vehicles with three seats, i.e. those used for transportation of goods when doing business were excluded from the higher registration fees. The fee also remains unchanged for electric cars.

The vehicles groups that are subject to the higher registration fees include passenger cars, motorbikes, all-terrain vehicles, utility vehicles up to 3.5 tonnes, and vehicles with eight passenger seats plus the driver’s seat.

With regards to its members’ client structure, the ALS SR registered a significant increase in retail clients, where business increased 23 percent to €255 million. It regards this increase as lying behind the change in the structure of financial products used, with the share of products popular in the retail segment, i.e. loans and instalment sales as well as operative leasing, increasing to the detriment of financial leasing. On the other hand, the business sector decreased moderately.

“Last year the Slovak market was tackling the crisis, which was responsible for the reduced interest [of businesses] in financing their purchases via leasing,” Igor Horváth, the director general of Tatra Leasing said, as quoted by the Goodwill magazine. “Over 2012 many companies re-assessed, put off their plans, or abandoned completely the possibility of financing [a purchase] via a leasing contract or a loan.”

Such developments changed the proportion of client groups on the market. The share of retail clients, in terms of the volume of new leasing deals, increased from 11 percent to 14 percent. But the association refers only to a ‘return to normal’, as the proportion of this group of clients was between 14 and 15 percent in the years before the crisis.

With regards to passenger cars, of every 10 new cars purchased by private individuals four were financed via leasing, compared to five in the business sector.

The machinery and equipment leasing sector contracted by 3 percent to €418 million in 2012. The association ascribes the decrease to a 25-percent drop in financing of alternative energy sources (photovoltaic and biomass) compared with 2011.

Even though the leasing market as a whole failed to grow significantly in Slovakia in 2012, for ČSOB Leasing it was an exceptionally successful year.

It recorded an increase in business of €332 million, or 19 percent compared with the previous year, Richard Daubner, CEO of ČSOB Leasing, told The Slovak Spectator. The company, which grew for the fourth consecutive year, took first place in the market with a share of 18 percent. With regards to financing in particular sectors, ČSOB Leasing placed first in the market for trucks, and for machinery and equipment, and second in the market for motor vehicles up to 3.5 tonnes.

However, so far this year ČSOB Leasing’s growth has slowed and the firm says there is growing competition among leasing companies in some market sectors, especially for truck leasing.

“Basically, the development on the leasing market is in line with our expectations,” Daubner told The Slovak Spectator, adding that sales of cars up to 3.5 tonnes and thus also their financing is being depressed by the increased registration fees. “With regards to classic business commodities with high purchase prices like trailers, semitrailers or machinery, technologies or equipment, here the appetite of companies, apart from the current decrease in interest in Slovak products and services from abroad, is also negatively influenced by the increased income and payroll taxes on Slovak entrepreneurs.”

UniCredit Leasing placed second in the market, with new deals amounting to almost €253 million, a fall of about €43 million compared to 2011.

“We can fully ascribe this drop to the decline of the aggregate market in the sector of financing of long-term real estate and photovoltaic projects,” said Dušan Keketi, a member of the board of directors of UniCredit Leasing, as quoted by Goodwill.

Expectations for 2013

Leasing companies expect Slovakia’s slowing growth to affect the leasing market this year.
“The slowdown of the economy as well as the increase in unemployment are factors, which will significantly influence the interest in financing purchases via leasing and will be reflected in the operation and final results of the leasing market in Slovakia,” Horváth of Tatra Leasing said, as quoted by Goodwill.

Keketi of UniCredit Leasing also expects less positive development, saying that the introduction of higher registration fees for vehicles up to 3.5 tonnes may result in worse figures. He even hinted that companies, in their efforts to save on registration fees, may register their vehicles in the Czech Republic.

ČSOB Leasing said it expects a moderate improvement in the whole leasing market during the second half of 2013, especially with a revival in demand from western Europe, in particular Germany.

Daubner expects that financing of investments using European credit lines will be a hit this year amongst entrepreneurs. ČSOB Leasing said it has prepared for this expected trend by signing a cooperation agreement with the Council of Europe Development Bank securing it €75 million. It also continues to cooperate with the European Investment Bank, said Daubner.

Topic: Finances and Advisory


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