Verkehrsmonitor - Car Leasing could become less important
Car Leasing has been growing in Switzerland for years. This could change with additional mobility offers such as car sharing and car subscriptions. What's in store for lessors and how automotive companies are reacting.
Verkehrsmonitor, Peter Ilg in an interview with Erik Wirz
Leasing is the most popular form of car financing in Switzerland. New mobility models could change this.
"Vehicle leasing is undergoing a significant transformation, driven by rapidly changing consumer preferences," says headhunter Erik Wirz.
Mobility trends such as car sharing and car subscriptions are competing with traditional leasing. This is having an impact on this popular type of vehicle financing. Wirz is the owner and Managing Partner of Wirz & Partners, a Swiss executive search company based in Zug.
But why is a headhunting company involved in car leasing? "We do it because we want to understand the leasing industry," says Wirz. In order to find top executives for banks and leasing companies, it is necessary to understand the specialist topics that clients are dealing with today and in the future.
This is why the company has written the white paper entitled "Leasing trends 2024: Future-oriented dynamics and their impact on the Swiss market".
According to a representative survey conducted by the digital comparison service comparis.ch at the end of last year, only 45 per cent of car owners finance their vehicles themselves. The majority of the Swiss vehicle fleet is financed externally. Leasing is the most popular form: one in three choose this option.
Car leasing is a CHF 16 billion market
According to figures from Statista, a German online platform, turnover in Swiss car leasing rose from CHF 11 billion to CHF 16 billion between 2012 and 2022. That is an increase of almost 50 per cent. The commercial car leasing business halved to 1.5 billion Swiss francs in the same period, while private vehicle leasing doubled to 14.6 billion.
"Leasing as a form of debt financing has been a widespread form of financing on the Swiss market for years and continues to grow in popularity," says Marie-Theres Zell, Head of Corporate Communications at the Cham-based Amag Group. Attractive offers, high cost transparency and additional service packages speak in favour of this form of financing.
A good half of Amag's fleet vehicles for business customers are financed externally. There is also a trend towards full-service leasing. Here, the lessee pays a fixed lump sum for certain services in addition to the leasing instalment. These include maintenance, repairs and insurance. The advantage of this type of leasing is its cost transparency, as almost all vehicle costs are included.
According to the Swiss Leasing Association, around 522,000 private cars were leased in Switzerland in 2022. Leased vehicles are returned to the lessor within two to four years, which is how long leasing contracts usually run. They can then sell them or offer them for lease again.
"Leasing companies are lagging behind in the transition to zero-emission vehicles."
Erik Wirz, Owner and Managing Partner of Wirz & Partners.
The automotive sector is being regulated ever more strictly, particularly with regard to environmental regulations," says Wirz. For example, CO2 emissions from new cars and vans must be reduced to zero by 2035. "This poses a significant challenge for the leasing industry, which is lagging behind in the transition to zero-emission fleets," says Wirz.
As a result, it may no longer be possible to market older vehicles, which could result in losses.
In addition, customer needs have changed. "The younger generations in particular are showing less interest in car ownership, which means a shift in mobility requirements," says Wirz. The car market in Switzerland is currently shrinking in the new vehicle segment.
Although purchasing power and therefore the theoretical possibility of buying new cars has increased since 2016, the number of newly registered vehicles has fallen significantly over the same period. According to the Federal Statistical Office, from around 320,000 to 256,000 last year.
Car-Sharing as an alternative to car leasing
According to Wirz, a shift towards shared vehicles is recognisable in vehicle leasing. This development would indicate a significant change:
"Mobility is increasingly understood as a service, with high satisfaction rates for car sharing according to surveys indicating that this offer is well tailored to the market and the needs of customers."
Forecasts assume that Car-Sharing sales in Switzerland will rise to around CHF 189 million by 2026, which would correspond to average annual growth of 4 per cent.
According to Wirz, another mobility trend that is having an impact on leasing is car subscriptions. This is a flat rate for driving and a type of leasing, but with much shorter terms. As with leasing, a subscription user does not acquire ownership of the car, but owns it for a fixed monthly fee for a certain period of time. The all-inclusive price of a car subscription already includes all additional costs, similar to full-service leasing. "In the search for flexible mobility solutions, car subscriptions will become increasingly important in Switzerland in the future," says Wirz. How should Swiss car leasing companies react to the changes? Wirz refers to a study by PricewaterhouseCoopers (PwC). The Swiss branch of the global auditing and consulting firm advises leasing companies to "recognise the urgent need for change demanded by the market in order to prepare for the complex journey ahead".
Amag has been offering car subscriptions and car sharing services for years. "Compared to leasing or traditional cash purchases, the market share of these offers is still in the low percentage range," says Zell. Customers mainly opt for leasing when it comes to external financing.
So far, Amag has not noticed a decline in interest in car ownership. But if it does happen, the largest Swiss car company has made provisions with a variety of new mobility offers for every budget - from hire to purchase.
