Global Finance Report20 May 2014
In the immediate aftermath of the financial crisis, the considerable instability and nervousness about economic prospects globally had a profound impact on the asset and auto finance industry. While mature markets in North America and Europe recovered quickest and started on the path back towards pre-recession levels of activity within three years, growth in asset finance remained muted as many companies and individuals proved reluctant to invest. Up until 2013, leasing here was characterized by replacement cycles, rather than by a surge in new investment.
The beginning of 2014 saw the publication of the latest round of deliberation on new international accounting rules on leasing which are likely to see most leases brought onto company balance sheets in the longer term. With the two main standards-setting boards indicating that there is still some distance between their views on the most appropriate model for achieving this, there remains considerable uncertainty in the short term as to how the proposed “two model” approach will work in practice. Many companies will be fearful that a complex and costly compliance burden may jeopardize future prospects, while changes to the tax regime for leasing may serve to undermine its appeal.
Despite this, there are signs that the asset and auto finance industry will be moving into calmer waters as 2014 progresses. The industry has already weathered the financial crisis, severe problems in several of the eurozone economies and a highly restricted lending environment. It is now emerging into a new era where austerity has become a way of life, and where the belt-tightening which has characterized the last few years is not viewed as a drag on the industry, but an opportunity.