Good business for leasing companies

Harshini Perera

Local leasing companies have performed well during the first four months of this year. Large-scale leasing companies have had a 100 percent growth for the past four months and can anticipate a boom in the industry now, Leasing Association of Sri Lanka Chairman Sanjeewa Bandaranayake told Daily News Business.

There will be an increase for vehicle leasing with the tax reduction on imported vehicles.

“The need for leasing companies has been felt in North and East areas strongly after the war.

“Leasing companies in those areas have been catering to the agricultural equipment and commercial vehicles especially from the SME sector in those areas. The demand for commercial vehicles for business purposes has increased to 90 percent of the total leasing in those areas,” he said.

Almost all the leasing companies have set up branches in North and East areas at present. It is expected that the demand for vehicles and equipment from those areas will go up in the future.

Leasing companies are in a difficult situation when it comes to depreciating equipment more than vehicles. Vehicles normally depreciate after five years whereas equipment takes over eight years to depreciate.

When a leasing company repossess a vehicle, the companies have to adhere to a time consuming legal process. This has been a challenge throughout the leasing industry and needs to be addressed soon, Bandaranayake said.

The tie-ups between the leasing companies and auto mobile companies are further encouraged since both parties mutually benefit.

Considering the duty reduction on un-registered vehicles now, a drop in the value of repossessed vehicles can be expected in the future.

“This can also be a challenge to the leasing industry when it comes to repossessing. The average leasing transaction performed for a month has been between 60 to 70 percent for registered vehicles. With the duty reduction it can expect a growth in coming months,” he said.