Prices of Leasing Services in Bulgaria Go Down

Business » FINANCE | December 21, 2020, Monday // 15:00
Bulgaria: Prices of Leasing Services in Bulgaria Go Down dir.bg

The leasing market turnover is a little over BGN 4.3 billion by 30 September 2020, representing nearly 4% of the country's GDP, according to BNB data. Despite the challenges of 2020, the receivables of leasing companies under financial and operating leases reported an increase as of the third quarter of 2020, indicating that even in this unusual and difficult market environment, leasing continues to be a form of financing sought by many clients, both physical and legal persons.

The business of leasing companies is directly related to the global economic environment in the country and especially to what extent it affects the investment intentions of companies and the population.

What we are noticing this year, mainly as an effect of the Covid-19 pandemic, are the more limited purchases of assets inherent in leasing in some of the market segments. The reason is that some of the companies postponed the realization of their planned investments for a later stage in order to have a clearer idea of the effects that the pandemic would have on the development of their business", the Bulgarian Leasing Association told dir.bg.

Experts add that citizens' purchases of cars this year also show some ebb compared to last year because of market uncertainty.

"These market trends naturally also have an impact on the demand for a leasing service, but it remains the preferred form of financing when purchasing vehicles, machinery and equipment. Overall, the upward trend on the leasing market in recent years has persisted, albeit at lower rates," the Association explained.

Deferral of lease payments

It is important to know that the leasing companies, subsidiaries of banks, are provided for in the procedure for deferral and settlement of the required obligations to mitigate the consequences of the Covid-19 pandemic approved by the BNB. In practice, however, all leasing companies have mechanisms to facilitate payments by their customers.

"In the event that particular customers have difficulty paying off their obligations under a lease, what they can do is turn to the leasing company servicing it and discuss what the options would be for payment relief according to their particular case in order to find the best solution for both parties," the Association explained.

However, the lease deferring involves some more costly obligations. It varies on a case-by-case basis.

"Some of the important points in determining the lease price at the beginning of the contract, and possibly in the case of deferral of repayments, are the type of specific asset that the lessee uses, its depreciation, as well as the repayment period under the lease," the leasing association explained further.

They added that the client’s interest rate is also correlated with the price of the cash resource that leasing companies engage for their portfolios.

Since in the segment of physical persons, the most massive is the leasing of new or used cars for private use the requests for deferral of lease installments mainly concern this type of asset. These are mainly cases where customers are affected by the pandemic through a decrease in the income they receive and, accordingly, which they use to serve their liabilities, the Association added.

"In recent years, the trend has been towards a gradual decrease in the price of the leasing service, as is the case with most credit services on the market," the experts said.

 

 

 

 

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