Challenges & Opportunities in the Automotive
Leasing Industry
Positioning products and services in a difficult environment
5 October 2009, Prague
Agenda
1. What constitutes a difficult
environment for our customers ?
2. How can our clients use our products
to control costs and take advantage
of hidden opportunities ?
3. The continuing and increasing
demand for full service leasing for
fleet management.
Who Are LeasePlan ?
LeasePlan
LeasePlan is a Corp. holds a Although profits have
global company universal bank come under pressure
providing worldwide licence & is owned recently, LP made a
operational fleet 50% VW, 50% Fleet
€203mn net result (08),
Investments BV
leasing and fleet in large part thanks to
(strategic &
management operational its diversified income
services independent) profile
Well-diversified
corporate customer
LeasePlan
base, well-spread
Corporation has
across industries;
1.3 million vehicles
Diversified portfolio of
under management
car makes,
in 30 countries
manufacturer
independent
Old World & New World
Drivers of a Challenging Environment: Economic
Weakness in the second hand vehicle market
y Resale results; consumer & corporate confidence and credit availability
y Future Residual Value pricing
Availability and cost of money
y Restricted access
y Increased cost though still affordable and relevant
y Focus on return
The risk of default and credit risk
Volatility of Oil Prices
Impact of decreased economic confidence
Source: ACEA – New Passenger Car Registrations Jul ‘09
Page 6
Deterioration in resale results
Relative sales proceeds LeasePlan Group
125
115
105
95
85
75
jan-03
aug-03
mrt-04
okt-04
mei-05
dec-05
jul-06
feb-07
sep-07
apr-08
nov-08
jun-09
Relative sales proceeds (indexed; jan '03 = 100)
Impact on future residual values (€)
Germany
Average Residual Values in €
10,000
-12%
Since Q1 ‘08
7,000
2006Q4 2007Q1 2007Q2 2007Q3 2007Q4 2008Q1 2008Q2 2008Q3 2008Q4 2009Q1 2009Q2
France
Average Residual Values in €
9,000
-11%
Since Q1 ‘08
7,000
2006Q4 2007Q1 2007Q2 2007Q3 2007Q4 2008Q1 2008Q2 2008Q3 2008Q4 2009Q1 2009Q2
Source: LPI Cost & Market Trends Q2 2009
Impact on future residual values (€)
-25% (-15% ex fx)
since Q1 2008
Source: LPI Cost & Market Trends Q2 2009
Interest Rates – Increased Spreads
iBoxx spreads show improvements and tightening of spreads after a peak in March 2009
(Jan 07 – Aug 09).
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4 Year Base Rate vs 4 Year SWAP Rate
Monthly Average Domestic Crude Oil Prices 2008 -
2009
$140.00
$120.00
$100.00
$80.00
$60.00
$40.00
$20.00
$0.00
Source: www.inflationdata.com/inflation/Inflation_Rate/Historical_Oil_Prices_Table.asp
Germany – Diesel index
Diesel index Germany
Diesel index Germany Average diesel index of all countries in sample
150
140
130
120
110
100
90
80
mar apr may jun jul aug sep oct nov dec jan feb mar apr may jun jul
2008 2008 2008 2008 2008 2008 2008 2008 2008 2008 2009 2009 2009 2009 2009 2009 2009
Months
Source: LPI Cost & Market Trends Q2 2009
Positioning Products and Services
Further strengthening of the traditional Total Cost of Ownership concept
y Need for greater transparency and explanation
y Assert the affordability and competitiveness of each element of TCO
y The need to include fuel cost
y Lease extentions to reduce the overall TCO; cost reduction and cost avoidance
Fleet Policy to focus on reducing controllable cost segments of TCO
y Restrictions on vehicle selection
y Increased importance of negotiation with OEMs
y Corporate willingness to downgrade vehicles
Buy versus Lease
y Precious commodity; sharp focus on importance of liquidity
y Spotlight; how are we performing ? What else could we have done ?
y Headcount challenge: outsourcing for expertise, control and service delivery
Drivers of a Challenging Environment: Structural
The increase of environmental considerations; esp. green taxes
The importance of Corporate Social Responsibility including the gradual
introduction of stronger driver safety / duty of care legislation
Uncertainty on future Accounting Standards
CO2 taxation
16 EU countries now employ CO2 tax
y DE: circulation tax changed 1st July 2009 = base tax & CO2 tax impact
y FR: bonus / malus scheme around specific CO2 targets (130 & 160 g/km) for
purchase as well as CO2 construction for company car tax.
y NL: registration tax operates under a bonus / malus scheme
y UK: CO2 rates dictate road tax, company car benefit taxation and recently
writing down allowances
Tax schemes differ widely across Europe
y UK, FR and LU CO2 is only factor for car taxation
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Duty of Care Compliance: Risk Assessment
Company Cash Occasional
Car Driver Taker Business Driver
Policy Vehicles
y Compliant y Fit for purpose
y Communicated y Maintained correctly
y Read y Active & passive safety equipment
y Understood y Drivers conversant with all aspects
y Agreed of vehicle
y Accepted y Ergonomic consideration
Drivers Journeys
y Competent y Planned
y Capable y Realistic
y Trained y Schedules
y Fit and healthy y Fatigue / break advice
y Weather considerations
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Positioning Products and Services
Thorough understanding of complicated topics by customers and users
y Fleet Balance; People, Planet, Profit
y Green Summits, Carbon Footprint & Benchmarking
y Objective “white papers” for awareness
Re-defining Total Cost of Ownership especially for vehicle selection
y All CO2 related costs need to considered
y Impact of Driver Risk and Driver Downtime
y Need to include all insurance related costs
y VAT and Corporation tax recovery
Importance of CO2 control and reduction
y Commitment to corporate goals and obligations
y Catalyst to reduce the overall size of the TCO; vehicles and fuel cost
y Car Qualifier: People, Planet, Profit
Full Service Leasing Remains The Right Choice
Stability & Cost Management
y Fixed monthly rentals
y Awareness and ongoing targetting of control of TCO
y Identified running costs with assurance that the right price is paid
y Disposal - swift resale through the optimum channels
Competitiveness
y The scale of an international leasing provider ensures competitive terms are obtained
Risk transfer
y Monitoring & budgeting of risk (maintenance, tyres, resale etc.)
Outsourcing
y Management of every element of a vehicle’s life and driver expectations by an expert
Appreciation of customer needs
y A good leasing company understands how its customer can efficiently exercise its own
scale to control & reduce its costs
Full Service Leasing Remains The Right Choice
For full service leasing, the key customer benefits remain:
SERVICE
CONTROL
EXPERTISE
Thank you
Appendix
Number of New passenger Car Registrations
Sourc: ACEA – New Passenger Car Registrations Jul ‘09
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Corporate Defaults (U.S.)
Standard & Poors speculates that the U.S. Corporate Default Rate could be forecast to
reach 14.3% by March 2010
y the count of defaulting issuers has progressively accelerated in the past 4 Q’s
y In the first quarter of 2009, the number of corporate casualties in the U.S. continued to accelerate
- in line with expectations - to 38 issuers
Historically, defaults have continued to escalate even after signs of economic recovery.
The steep increase in corporate defaults reflects the decline in economic momentum &
earnings prospects as well as continued credit freeze
Unwillingness on the part of risk-averse lenders to roll over debt for all except the most
creditworthy borrowers could accelerate default flow.
The number of issuers seeking loan amendments nearly doubled in each month of Q1
according to S&P’s Leveraged Commentary & Data (LCD)
y 16 in January, 31 in February & 51 in March.
Source: Standard & Poors
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CO2 Taxation, Some Examples
The Federal Government has decided to change the basis of the annual circulation tax as from 1 July 2009. It will consist of a base tax and a CO2
tax.
DE
The rates of the base tax will be €2 per 100 cc (petrol) and €9,50 per 100 cc (diesel) respectively. The CO2 tax will be linear at €2 per g/km.
Cars with CO2 emissions below 120 g/km will be exempt (110g/km in 2012-13, 95g/km subsequently).
Under a bonus-malus system, a premium is granted for the purchase of a new car when its CO2 emissions are below 130g/km. The maximum
premium is €5,000 (beow 60 g/km). A 'super' bonus of €1,000 is granted when a car of at least 10 years old is scrapped and the new car
purchased emits maximum 160g/km.
FR A malus is payable for the purchase of a car when its CO2 emissions exceed 160 g/km. Tha maximum tax amounts to €2,6000 (above 150 g/km).
In addition to this one-off malus, cars emitting more than 250 g/km pay a yeary tax of €160. The different thresholds of the bonus/malus system
are strengthened by 5 g/km every two years.
The regional tax on registration certificates (carte grise) is based on fiscal horsepower, which includes a CO2 emissions factor. Tax rates vary
between €27 and €36 per horsepower according to the region.
The company car tax is based on CO2 emissons, Tax rates vary from €2 for each gram emitted for cars emitting 100 g/km or less to €19 for eacg
gram emitted for cars emitting more than 250 g/km.
1. The rate of the registration tax (based on price) is reduced or increased in accordance with the car's fuel efficiency relative to that of other cars
of the same size (length × width).
NL The maximum bonus is €1,400 for cars emitting more than 20 per cent less than the average car of their size (A label), the maximum penalty is
€1,600 for cars emitting more than 30 per cent more than the average car of their size (G label).
Hybrid cars benefit from a maximum bonus of €6,400. Cars emitting maximum 95g/km (diesel) and 110g/km (other fuels) respectively are
completely exempted from this registration tax.
Cars emitting more than 205g/km (petrol) and 170g/km (diesel) respectively pay an additional tax supplement of €125 per gram emitted in excess
of these thresholds.
1. The annual circulation tax is based on CO2 emissions. Rates range from £0 (up to 100g/km) to £400 (petrol, diesel)/£385 (alternative fuels) for
cars emitting more than 255g/km.
UK
2. Company car tax rates range from 10 per cent of the car price for cars emitting up to 120g/km to 35 per cent for cars emitting 235g/km or more.
Diesel cars pay a 3 per cent surcharge, up to the 35 per cent top rate.
Source: ACEA
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