The global finance lease market is anticipated to witness remarkable growth over the forecast period in line with the growing demand for expensive machinery, equipment, and other necessary assets from incumbents of the healthcare, construction, and IT & telecom, among other industries. Finance lease envisages a type of lease whereby the lessor purchases the asset required by the lessee, and the lessee utilizes the asset and pays rent for using the asset during the lease. The lessee also has the option to acquire the ownership of the asset after the lease is over.
Finance lease benefits the lessee in the form of a cost-effective mode of acquiring assets. Moreover, it also helps in freeing the working capital, which the lessee can invest in its core tasks. On the other hand, the lessor can recover the cost of the asset and also earn interest from the rent paid by the lessee.
Although regulatory changes have added to the costs of the incumbents of the finance lease market, they have also added to the credibility of finance lease providing companies, thereby allowing them to leverage the capital market boom and raise a substantial amount of capital through public issues and private placements
The global finance lease industry has been segmented into product, type, application, and region. Based on type, the market has been segmented into banks and non-banking financial institutions. Non-banking financial institutions widely use the finance lease system as it provides benefits of depreciation and consequent tax benefits. The growing preference for leasing equipment among small and medium-sized businesses due to capital constraints is driving the growth of the finance lease market.
Based on the product, the market has been segmented into the international business and domestic business. While international business lease carries the risks associated with regulatory changes in various countries and fluctuating exchange rates, domestic business lease carries comparatively lesser risks. Domestic business lease dominates the finance lease market as a result.
Based on application, the market has been segmented into automotive, Energy, Chemical, and Infrastructure (ECI), aviation, Telecom, Media, and Technology (TMT), shipping, manufacturing, medical devices, construction machinery, and others. Aviation and medical devices industries particularly approach financial lease providing companies for capital-intensive leasing equipment, such as aircraft and MRI machines, among others owing to the high purchase and maintenance costs associated with such equipment.
Based on the region, the market has been segmented into North America, Europe, Asia Pacific, Latin America, and the Middle East & Africa (MEA). The Asia Pacific regional market emerged to be the largest regional market in 2018, owing to the expansion of the construction industry, particularly in India and China. Adhering to a finance lease system to acquire construction equipment is a common practice in China and India, among other Asia Pacific nations.
While finance lease helps enterprises facing financial constraints in acquiring expensive assets, the finance lease market also has to confront a few market restraints. For instance, the risks stemming from exchange rate fluctuations and the hardships encountered due to a varying regulatory scenario in different countries can potentially discourage finance lease service providing companies willing to provide international finance lease services.
The key players in the global financial lease market are Sumitomo Mitsui Finance and Leasing Co., Ltd, HSBC Group, Wells Fargo Bank N.A., Bank of America Leasing & Capital, LLC, JP Morgan Chase & Co., and BNP Paribas Leasing Solutions.
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