The number one external-financing option
Leasing is of enormous significance in the marketplace. Almost a quarter of overall investment in equipment is realized through leasing. And leasing accounts for more than half of all investments in equipment that have been financed externally (i.e. not with equity capital, or with tax returns from depreciation). It is now the most popular alternative to the classic bank loan, and as such it has become an indispensable economic motor, and a formidable driver of innovation. The leasing penetration rate (i.e. the proportion of capital investment in the economy overall accounted for by leasing) is a sure indicator of the importance of leasing to the German economy.
Leasing is firmly established as an integral part of everyday economic life, and there is growing demand for the financing services provided by leasing companies, particularly in the medium-sized enterprise sector. The value of all the economic assets currently being leased in Germany stands at over 220 billion euro. Some 2 million new leasing agreements are signed every year, and around 85 percent of these are concluded with medium-sized companies. The annual volume of new business acquired (i.e. the overall acquisition cost of the assets for which leasing agreements were concluded in the twelve-month period) currently stands at around 65 billion euro.
The most recent Kantar study of the German market, "Leasing in Deutschland 2020", records that 80 percent of companies in Germany give leasing due consideration as a financing tool when they want to make an investment, and around 75 percent either regularly or occasionally use leasing.
While just some years ago (2015) 36 percent of companies would not have considered using leasing, only 21 percent of companies fall into this category today. As things currently stand, three out of four companies choose to use leasing to finance investments. In particular, SMEs (companies with up to 50 employees) are making greater use of leasing now than they did five years ago. And more companies have become “heavy users” of leasing. In other words, they either very frequently or always lease their vehicles, machinery, IT equipment and other assets. 40 percent of the companies surveyed belong in this category, whereas the figure for 2015 was just 24 percent.
A comparison with the USA, where leasing was successfully introduced a decade earlier than in Germany, gives a clear indication of the enormous potential that still exists in the German leasing market. Around 2005, the overall leasing penetration rate in the United States stood at just over 30 percent. It then fell dramatically as a result of the financial crash, and it currently stands at just under 20 percent; however, it is once again trending upwards. In Germany, the leasing penetration rate is currently somewhere around 15.9 percent. This figure surely provides an additional incentive for the German leasing industry to bring about permanent improvements to what is already an extremely efficient product. This is how they will achieve even wider acceptance of their services in an already receptive domestic market.