The French leasing industry has seen a resurgence of
business, especially in the fields of transport and real estate,
thanks to government measures that incentivised investment.
However, economic uncertainty means it will be a while before the
market regains the stability it enjoyed before the crisis. Mark
For many years, stability has been cornerstone of the French
leasing market. Growth was consistently moderate but steady, with
positive results year on year.
Despite the wider economy
shrinking, even 2008 was shaping up to be a good year for leasing
as the first three quarters reflected growth of 8.4%. But
eventually, leasing succumbed as well. Figures for the final
quarter show that the market contracted by 11.5% year-on-year.
It took one year for France to
emerge from recession, returning to growth in the second quarter of
But leasing took much longer to
recover. Business fell by 23.5% during 2009, a contraction
described by French leasing association L’Association Francaise des
Societes Financieres (ASF) as “unprecedented”.
It would be halfway through 2010
before many French lessors received any positive news.
Since then, the outlook has been
much more positive. Figures for 2010’s second quarter showed
leasing investment increasing by 5.4% year on year, a figure
repeated in the third quarter and a leap to 11.5% in the final part
of the year.
ASF deputy director general Alain
Lasseron says: “There has been a real improvement in the equipment
leasing business since the second quarter of 2010.
“The year ended with a 3.9%
increase in new investment. In the first quarter of 2011 we have
seen growth of 15.4% compared with the first quarter of 2010.”
His views are echoed by other
Paul Johnson-Ferguson, partner at
asset finance consultancy Invigors EMEA, says: “The market is
definitely picking up in France. You can see that the players who
had scaled back are now much more active.”
Martin Oberberger, international
marketing director at Key Equipment Finance, adds: “After the
economic crisis and its impact, we saw some slow recovery in 2010.
We do see good growth this year and we are quite optimistic for the
Equipment leasing in France is
split across two markets: leasing without option to buy, which
accounts for 44% of the market, and leasing with option to buy,
which makes up the remaining 56%.
Figures from the ASF show that the
two markets both saw growth in 2010, although there was a
significant disparity between the two. Leasing without option to
buy grew by 7.3%, outperforming leasing with option to buy which
grew by 1.4%.
Transport outperforms other
The equipment leasing market is
dominated by three major asset classes.
Johnson-Ferguson says: “The biggest
asset class is transport. Transport is a huge market in France and
has always been one of the biggest markets. IT has also always been
big, office equipment has been very big.
“These are the big sectors where
you will see the numbers.”
These asset classes account for
nearly three-quarters of the overall market. Transport, including
cars and other commercial vehicles accounts for 57% alone. IT
equipment represents 9% of the market while other office equipment
Cars and vans have been the star
performer of the asset classes since the economic crisis and
according to the ASF, saw growth at an average of 15% across the
different lease options between 2009 and 2010.
Vehicle lessor Leaseplan France was
a particularly strong performer, recording a rise in profits of
nearly 50% between 2009 and 2010.
President Dirk Pissens says: “The car and van leasing
market has done well during the financial crisis. The portfolio has
increased in France. In 2011 we expect to see growth.”
The ASF’s figures appear to reflect
this, showing an increase in car leasing of all types in the first
quarter of 2011. But Lasseron sounds a note of caution, explaining
that much of the asset’s positive performance can be linked to a
car scrappage scheme brought in by the government to encourage
heavily polluting cars to be taken off the road.
“In 2010 there were some measures
taken to help people to sell their old used cars which explains the
increased figures for leasing of cars to individuals,” he says.
“This continues to have some
consequences at the start of 2011 because of orders that have been
taken in 2010.”
The scheme was phased out at the
end of 2010, although car sales continued to rise at the start of
2011. But cars bought under the scheme could continue to be
registered up until March.
After this, sales fell 11.2% in
April according to CCFA, the French carmakers association. The
association announced at the time that it expects sales to fall 8%
overall in 2011.
But Pissens says that, despite the
effect on car purchases, the leasing market is still showing signs
“These measures have been changed
at the end of 2010. It has impacted registrations in the last three
months but has not had an impact on the order intake in terms of
our business,” he says.
Pissens believes that there is one
particular market segment that has the potential to deliver
continued growth – small to medium enterprises.
“There is only 4% market
penetration of long-term rental in this market,” he says.
“Major companies is already a well
developed market. It is the small companies that have suffered a
lot during the financial crisis but now things are going better,
and they still need liquidity.”
Cars and vans may have experienced
a resurgence, but in other asset classes the picture is mixed.
Commercial and industrial vehicles have remained relatively stable,
showing increased investment in leases with option to buy but a
decrease in the much smaller market for leases without option to
Office and IT equipment has
remained stable overall year on year. Both categories experienced a
drop in investment in the lease with option to buy market, but an
increase in leases without option to buy.
Both markets combined reflected an
increase of around 4%. All other equipment, which includes
agricultural and machine tools, performed poorly, falling 4.5%
Beyond equipment financing, real
estate has shown particular promise since the crisis. The amount of
rent charged in 2010 actually fell by almost 1%. However, other
indicators suggest a much more positive performance still to
The value of real estate assets
owned by ASF members increased by 5.7% to €32.7bn, a slight
increase on growth the previous year at 5.5%.
And the value of contracts signed
increased by an average of 20.8% year on year, a vast improvement
on growth the previous year which was almost flat.
Asset classes such as local offices
and health facilities, which were strong performers in 2009,
performed poorly and fell around 20%. Prime industrial and
commercial assets saw the value of signed contracts increase by
47.5% and 42% respectively.
The unusually strong performance
can be attributed to measures introduced by the government, which
allow property owners to spread tax payments across the length of a
lease, leading to a boom in sales and leaseback transactions.
Lasseron says he expects growth in
this area to continue.
“The success of real estate leasing
is due to tax reasons,” he says.
“In 2009 there was a measure
introduced which allows the owner of commercial real estate to
carry out a sale and leaseback with deferred taxes on the increased
value. This tax measure explains a great part of the 2010 results.
We consider that this measure means that figures for 2011 will also
It is no coincidence that cars and
real estate, the two outstanding asset classes, have been the
subject of government tax measures that have boosted their
Without this intervention, there is
no doubt that leasing in France may have remained in the doldrums
for longer than it has done. But regardless of the reasons, the
boost has come as welcome relief from a difficult period for French
Nevertheless, some asset classes
are still performing poorly. In addition, the national economic
picture is still rocky.
The French economy grew by around
1.5% in 2010, but this compared to 3.6% in Germany and 1.7% for the
entire eurozone area. Despite low expectations, in February this
year economists cut their growth estimates for the French economy
in 2011. Economic uncertainty has affected the leasing sector.
Johnson-Ferguson adds: “France will
not grow as fast as Germany or the UK because of the predominance
of government jobs which are cushioned in the recession but also
cushion against growth.
“France has been protected on the
downside but the same factors that protected it will stop it
growing as fast. There is historically less investment when there
has been growth.”
There are certainly areas of
opportunity, which it is hoped can sustain investment in asset
classes such as cars now the government’s scrappage scheme has been
phased out. Experts predict the real estate leasing boom will
continue. And as the economy recovers, so will the smaller asset
classes. Early signs this year have been positive.
However, Lasseron says: “It is
difficult to say if this will continue throughout 2011.”
Uncertainty still reigns. It could be some time before France
regains its stable reputation.