Two full decades have passed since leasing made its appearance in Serbia. In this time more than eight billion euros have been invested in the economy through this form of finance. In the last 10 years, the sector has recorded a stable growth of 13 % per annum despite the challenging macroeconomic environment I n the years to come, the leasing industry will focus on digitalization and the green transition. Besides financing the purchase of electric vehicles, leasing will support it by financing the construction of production facilities for renewable energy sources, primarily solar power plants.
Two full decades have passed since the appearance of leasing in Serbia, during which more than eight billion euros have been invested in the economy through this form of financing. In these 20 years, about 250,000 contracts were signed, mostly for financing passenger vehicles. According to data from the Association of Leasing Companies of Serbia, every third new vehicle sold in 2022 will be financed in this way. Although leasing in our country mainly concerns the financing of passenger vehicles which in the third quarter of 2023 still dominate the portfolio with 47%, about 35% of the total production is made up of commercial vehicles such as various delivery vehicles and trucks, as well as city and tourist buses.
Besides this, leasing in Serbia has in many cases financed the purchase of machinery and equipment, from construction and agricultural machinery to various kinds of manufacturing equipment, so that with the growing popularity of the green agenda and green energy, leasing companies have begun to work on financing solar energy in which Serbia is following global and European trends.
FINANCIAL LEASING IS BOOMING
The global financial leasing market is expected to continue its years of strong growth as it provides companies with an alternative means of acquiring key equipment and resources without large initial capital expenditure. Among the factors driving the growth of the financial leasing market is the growing need for companies to remain competitive by constantly improving their assets. In fact, the ability to access state-of-the-art equipment without the burden of ownership costs is a significant driver, as are the tax benefits associated with leasing arrangements. This market is gaining momentum due to the advantages it offers, such as flexibility, tax benefits and capital preservation. The latter is especially important in conditions of global crisis, whether caused by a pandemic like three years ago or by war.
As in the past, it is expected that North America, especially the United States and Canada, will continue to dominate financial leasing in future, but Europe is no less an important player in this market. Countries such as the UK, Germany, France and the Netherlands have well-developed leasing industries and serve as major hubs for leasing activity. The Asia-Pacific region is experiencing significant growth in the financial leasing market, with China, Japan, South Korea and India increasingly embracing leasing as businesses look for cost-effective financing options, primarily in the booming manufacturing and construction sectors.
TIME TO ‘REFRESH’ THE LAW
Just as in Serbia, the largest global development in leasing will be related to the car leasing market, which will be influenced by many factors, such as technological progress, consumer expectations and changes in economic conditions. With increasing concern for the environment and an increasing emphasis on sustainable transport, the demand for electric vehicles is expected to grow, and so will the need for leasing to purchase them. At the same time we should remember that Serbia, with around 30,000 unsold vehicles, is below the European average and that the number is expected to be much higher. And that there are grounds for optimism is shown by the fact that the leasing industry has recorded a stable annual growth of 13% over the last 10 years, despite the challenging macroeconomic environment.
The Serbian Association of Leasing Companies says that it would be good and useful to ‘refresh’ the Financial Leasing Act. It was adopted long ago in 2011, and needs to be aligned with client’s expectations and technological developments, especially in terms of digitalization. Although the leasing industry has introduced many innovations in the digital aspect of sales since the pandemic, which clients can feel in their communication with leasing companies in the collection of documentation and the approval process, this is not yet at a satisfactory level since the industry is facing many obstacles that complicate the process.
Growth reaches 19% per year
Most leasing companies operating in Serbia have been founded by entities based in the European Union, so EU policies need to be applied here as well. They have committed to having a green portion in their portfolios, so we may expect leasing companies to set aside 20 million euros for financing electric cars, buses and light commercial vehicles by the end of this year, while next year that amount could be higher.
The Serbian Association of Leasing Companies says that in the coming years, the amounts allocated for indirect financing of environmental protection and reduction of greenhouse gas emissions will increase. And the fact that leasing has a huge potential in financing solar power plants, especially for consumers, has been shown by the number of contracts already concluded with those who will use solar power plants for their own consumption and for returning energy to the grid.
Financial leasing this year will amount to around 800 million euros, an annual growth of 19%. If the trend continues, it could reach 1 billion euros in new production next year.
Apart from the problems of a low limit for concluding remote contracts and the endless challenges for digital vehicle registration, there is also a small percentage of digitally signed contracts. Fortunately, projections suggest that in the next two to three years two-thirds of leasing companies will have digitally signed contracts, and that in the coming years, clients will have a much larger portfolio of digital services at their disposal.
In the next three years, the value of financing electric vehicles through leasing in Serbia could reach several tens of millions of euros, while it is expected that a third of the total number of contracts will be concluded partially or entirely digitally.
GROWTH REACHES 19% PER YEAR
Most leasing companies operating in Serbia have been founded by entities based in the European Union, so EU policies need to be applied here as well. They have committed to having a green portion in their portfolios, so we may expect leasing companies to set aside 20 million euros for financing electric cars, buses and light commercial vehicles by the end of this year, while next year that amount could be higher.
The Serbian Association of Leasing Companies says that in the coming years, the amounts allocated for indirect financing of environmental protection and reduction of greenhouse gas emissions will increase. And the fact that leasing has a huge potential in financing solar power plants, especially for consumers, has been shown by the number of contracts already concluded with those who will use solar power plants for their own consumption and for returning energy to the grid.
Financial leasing this year will amount to around 800 million euros, an annual growth of 19%. If the trend continues, it could reach 1 billion euros in new production next year.