Analyses
21 jan 19

2019, the year for private lease in Belgium

The private lease market in Belgium is tiny: just 12,000 vehicles. But 2019 is the year the big lease players will launch their private-lease solutions on the Belgian market. Is the market ready? And if it is, who’s best placed to win big? Fleet Europe went to the Brussels Motor Show to find out.

First, the thumbnail definition: private lease is full-service or operational leasing, but the customer is always an individual consumer.

The formula is gaining success because of changing consumer behaviour: people prefer usage over ownership and are familiar with fixed-cost subscriptions to bundles of services, as for their mobile phone. In the case of private lease, a predictable monthly sum pays for the use of a vehicle and for the associated cost in insurance, taxes, service and maintenance, repairs, roadside assistance and depreciation. Fuel and traffic fines are, of course, not included.

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Important footprint

Private lease already has an important footprint in Europe, in mature markets like the Netherlands, Germany and especially the UK. Frost & Sullivan estimates there are around 845,000 private-lease vehicles in Europe today, 60% of which in the UK alone, thanks to the success of the Personal Contract Purchase (PCP) formula. Private leasing will continue to grow, according to Frost & Sullivan: it foresees a market of 1 million vehicles by 2022.

Belgium is one of the countries where private lease is growing steadily, albeit at a slow rate. “In 2018, the lease companies registered 3,000 vehicles in Belgium under private-lease contract,” says Frank Van Gool of Renta, the country’s vehicle leasing and renting association. In total, the private-lease market currently counts about 12,000 cars.

That’s tiny, compared to Belgium’s B2B lease market – 140,000 vehicles registered last year. But growth is coming: “As yet, not every lease player is offering private-lease solutions. But 2019 will see the biggest ones each offer their own proper private-leas product, and that will boost the awareness, and the success, of private leasing,” says Mr Van Gool.

Back-office support

ALD is not yet offering private lease in Belgium, but the lease and fleet management specialist does do back-office support for OEMs, as it does for B2B full-service leasing. “Private lease is interesting, as it opens a new market segment. But it’s not a just a copy of full-service leasing from the B2B segment to B2C and B2E. It’s a little more complex than that,” says Miel Horsten, CEO of ALD Benelux.

He sees three distinguishing features: credit risk, customer contact and profitability. “The credit risk is higher for private customers than for our corporate ones”, he points out. DirectLease asks for a deposit of three monthly lease payments and pay slips, and checks the applicant’s latest tax statement.

“Customer contact is less frequent than in a B2B setting, but more time-consuming”, says Mr Horsten. And the profitability margin is smaller: “The investment in a B2B lease car is €26,000, while it’s €11,000 in a private lease car. But the cost of managing a private-lease contract is higher.”

Managing supply

The way to resolve this is by adequately managing the supply to both the private-lease and the used-car market, says Mr Van Gool. “This will be the year in which used-car leasing breaks through”, he says. “And the biggest chunk of that segment will be taken up by private-lease providers.”

According to Mr Van Gool, the private-lease market is an ideal environment for offering young, small and well-maintained used vehicles to a new consumer audience, at an attractive price.

 “To increase profitability, we do have to steer the market”, Mr Horsten agrees. “Used-car lease models is one element, another one is buying vehicles in larger volumes but offering them more selectively to the market. And the third element is using digitisation to speed up the process.”

Biggest player

With its brand PrivéLease, DirectLease currently is the biggest player on the Belgian market. The company started offering private lease in 2016, earlier than most other lease companies. It now manages 2,700 vehicles in private lease. They have a special offer during the Brussels Motor Show: a Ford Fiesta at €199/month and 10,000 km/year.

“Our business model was designed for a younger, dynamic population segment, but we see our customer base is a lot wider and more diverse than that,” says Belgium country manager Jean-Marc de Geus. “It includes older drivers, and people from both the lower-middle and upper classes.”

The PrivéLease website has almost 9,000 unique visitors per week, yet last year just 650 new private lease contracts were concluded. “The concept is relatively new, and we’re not as fast as the Dutch at trying out new finance solutions. But there will be faster growth in 2019,” says Mr De Geus: “There is a demand, the offering is growing, and as a supplier, you simply have to be in this market”.  

Three factors

According to Mr De Geus, market success depends on three factors: price, speed of delivery and the ability to offer popular brands and models. In Belgium, cars like the Peugeot 2018, Ford Fiesta, Fiat 500 and Opel Karl are doing really well. There is little appetite yet for private-leasing bigger premium cars or alternative powertrains.

Mr De Geus understands that car manufacturers are nervous about lease companies entering the B2C market segment, “But it’s just economics. On the private lease market, price is the number one deciding factor, not brand loyalty. So multibrand offerings will perform better than OEM-dependent ones”.

Anyway, it’s not like the OEMs themselves are making a big splash with their own private-lease efforts. None of the car brands we met at the Brussels Motor Show mentioned a private-lease offer on their stand.

Ford and Fiat nevertheless both have a special Motor Show promotions for private lease: Ford on the Focus (€259/month for 10,000 km/year) and the Kuga (€309/month), Fiat via its captive lessor Leasys on its entire model range (the Fiat 500 can be got for €164/month and the Jeep Renegade Sport from €299/month).

Growing, not booming

“Private lease is a fairly new concept, putting customer preference for hassle-free driving first,” says Tom Henau, Belgium country manager for Ford Credit. “We offer private-lease solutions for every model – next to the other finance solutions we have.”

The business is growing, but not booming: “On average, we have one private-lease contract for 30 other credit contracts.” Ford is not pushing private lease as such, nor specific models via private lease: “It’s not a marketing tool. It’s a finance solution we use if it fits the profile and the needs of particular customers.”

Volkswagen D’Ieteren Finance is the finance solutions branch of Belgium’s biggest car importer (VW, Audi, SEAT, Skoda). They have a similar position: private lease is growing, but it’s not the most popular option – nor the most interesting one, says a spokesperson. “Balloon financing, with the option to buy the vehicle at the end of the contract, is much more attractive. Private leasing will grow, but it won’t grow as big as the traditional car financing schemes.”

Authored by: Steven Schoefs