scania financial services - leaseurope · scania financial services what is an operating lease?...

Scania Financial ServicesPer Spjut, Vice President

From Finance Lease to Operating Lease Challenges and Opportunities

Leaseurope - Seminar for Lessors in Central, Eastern and South Eastern Europe, Kiev March 27th 2007

Scania Financial Services What is an Operating Lease?Operating Lease in parts of the CEE marketThe Captive Perspective Conclusions

Agenda


Denmark

Great Britain

France

Italy

Belgium GermanyPoland

Czech Rep.

Spain

The Netherlands

Luxem-burg

Russia

Slovakia

Estonia

Belarus

Ukraine

Bulgaria

Romania

Turkey

Bosnia-H

Croatia

Macedonia

Serbia

AustriaSwitzer-land Hungary

Norway

Sweden

Finland

LithuaniaLatvia

Geographic coverage

*including Turkey

Chile

South Africa

South Korea

Montenegro


Historic development:Coverage

Number of financed vehicles in % of Scania sales

02 0004 0006 0008 000

10 00012 00014 00016 00018 000

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

No o

f veh

icle

s

0%

5%

10%

15%

20%

25%

30%

Financed vehicles Coverage


Portfolio development

Portfolio development

0

5 000

10 000

15 000

20 000

25 000

30 000

35 000

2000 2001 2002 2003 2004 2005 2006

MSE

K

Western Europe Central & Eastern Europe Other markets


Specialists in transport finance– Better on assessing residual values– Better on evaluating transport companies

Packaging – Vehicle, financing, insurance and services

Quick and flexible– Short lead times, efficient administration– Linked with Scania dealer network

Supporting customers in good and bad times

Why captive financing?


Business risks– Residual values and R&M contracts are

managed by sales and service organisation

Credit risk– Managed by Financial Services

Funding– Matched funding in terms of liquidity,

interest rates risks and currencies

Risk management principles


Financial Services development

Development of integrated services

Cus

tom

er v

alue

Financing (loan)

Financing(leasing)

Fleet managementproducts

Financing with R&M contracts

Assistance / 24 hours services

Operating lease with R&M

Financing with insurance

R&M servicesproducts

Integrated services


Definition Finance and Operating Lease according to IAS 17

”A finance lease is a lease that transfers substantially all the risk and rewardsincidental to ownership of an asset.””An operating lease is a lease other than a finance lease.”


Future changes in IAS 17

Probably a change of IAS 17 in 2010No difference between Finance Leasesand Operating LeasesAll leases will be ”on balance” which willdisclose a lot of ”hidden assets” sinceOperating leases today are ”off balance”The impact on the Lessees ”gearing” willbe negative


Operating Lease % in some markets

Based on statistics from the Leasing association of the countries in question

Operating Lease share of total finacing

0%

5%

10%

15%

20%

25%

30%

2000 2001 2002 2003 2004 2005 2006

Estonia Czech RepublicSlovakia Austria


No asset risk Predictability of paymentsPre-defined services - all on one invoiceLower monthly paymentsOff-balance sheet treatment of vehicleOne stop shopping

Customer benefits


R&M contracts and geographic coverageProper management of residual value risksIncreased credit risk– Higher average capital outstanding– Lower down payment in repeat deal

Culture of owning equipment is strong in CEE markets

Challenges


Opportunities- the captive perspective

Attracts creditworthy CustomersAvoid head on competition with banksDecrease on margin pressureMonitoring of customer replacement cycle


Denmark

Great Britain

France

Italy

Belgium GermanyPoland

Czech Rep.

Spain

The Netherlands

Luxem-burg

Russia

Slovakia

Estonia

Belarus

Ukraine

Bulgaria

Romania

Turkey

Bosnia-H

Croatia

Macedonia

Serbia

AustriaSwitzer-land Hungary

Norway

Sweden

Finland

LithuaniaLatvia

Scania Operating Lease - Europe

*including Turkey

Montenegro

FY 2006 WE CE EE*Sales: 34 971 4 949 5 960Financing: 10 230 2 060 2 851w/o op. lease: 30% 20% 0%


Owner Operators

Different customers - different buying criteria

Medium fleets

Large Fleet Operators

Requirements of the international approach

Flee

t siz

e

Requirements:• TCO• Harmonized R&M• Harmonized Prices and RV• Harmonized financing• Buy-backs• Fixed pricing• Complete vehicle delivered

(including body)• Payment conditions• Penalties


Moderate but growing demand in most marketsDriven from West European fleet operatorsSelective approach due to increased credit riskR&M still not fully established in all marketsStrong tradition of transport companies running own workshops

Scania Operating Lease - CEE


No rapid shift to be expectedProper risk management key to successPotential for Lessors to gain volumes and serve new types of clients as well as existing clients in a new way Reduced focus on interest spread?Uncertainty with future accounting regulations

Conclusions


Thank you for your attention!

scania financial services - leaseurope · scania financial services what is an operating lease?...

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