Should you Lease or Buy in APAC?

At 5.2% of total vehicle sales, the penetration of the leasing product in APAC is much lower than is the case in Europe (23.8%) or US (30.5%). Its popularity however, is improving, as global fleet managers have started to look into the region with more interest for TCO control and effciency, and local businesses are becoming more risk conscious. This was confirmed during the Global Fleet Summit APAC 2021 on 20 and 21 January, where about 200 global and regional decision makers gathered to better understand the fleet market place APAC. 

When talking about the growth opportunities for vehicle leasing, we can't neglect the interest of the service providers in the APAC region. The supply chain is seeing opportunities in APAC, with more and more international finance, car manufacturing and technology specialists expanding their footprint across APAC, like leasing company ALD Automotive and telematics giant Geotab. This means that all elements are in place now for vehicle leasing and fleet management outsourcing to grow. An additional element in favor of this growth, is an increasing popularity of consumer solutions, such as private lease; private buyers too are becoming more careful and are moving away from cash purchase. 

Let’s have a closer look at the biggest Asian markets.

Japan
One of the most mature leasing markets in APAC where especially larger corporates will uniquely acquire vehicles through leasing. The Japanese leasing market is dominated by ORIX, Sumitomo and Toyota. It seems however that the local market is becoming saturated; the population of Japan is decreasing, and businesses have started the shift from analogue to digital, which means that car fleets sizes are very likely to shrink. Consequently, lease providers will have to reinvent themselves, and address the needs of new markets, such as the SME and consumer segment.

China
In APAC’s largest market, leasing is essentially an untapped potential for a variety of reasons: the car lease product is unknown, it was (until recently) not well regulated and, because the concept of TCO is unknown, leasing was perceived to be much more expensive than cash or finance. In addition, on-demand solutions, such as those provided by DiDi and Shouqi, are taking over a big part of the market potential.

Even though the market penetration is still extremely low, leasing is slowly becoming more popular, especially because of a combination of better regulation and corporate risk avoidance. A targeted offering of leasing for EVs will most probably accelerate the uptake of operational leasing further

India
At an estimated 9% penetration in corporate sales, India has not yet adopted leasing as the go-to solution for corporate mobility. Salary sacrifice systems and mileage reimbursements are predominant, but this is slowly changing. The operational lease suppliers on the Indian market are spending a lot of time and money in customer education: leasing had the reputation of being a “luxury” product and many enterprise clients are unaware of its potential benefits.

This investment in education is working well, but the price-conscious Indian companies will need the cost of the product to become more attractive before massively adopting lease as their preferred solution.

For more information, read our previous article about Lease versus Buy