Leasing Up: Navigating Resilience and Growth in Europe's Evolving Sector

Henry RiversTuesday, Jun 10, 2025 10:50 am ET
129min read

The European leasing sector has long been a bellwether for economic health, offering insights into everything from consumer preferences to corporate investment trends. Recent data reveals a sector grappling with profitability pressures but brimming with strategic adaptations that could unlock significant growth. Let's unpack the KPIs, challenges, and opportunities shaping its future—and where investors should look for value.

The Numbers: A Mixed Bag of Resilience and Strain

The sector's resilience is clear in its new business volumes, which rose 8% year-on-year in 2024 to exceed €123 billion. This growth, driven by surging demand for electric vehicle (EV) leases and equipment financing in renewables and healthcare, highlights a sector that's not just surviving but expanding.

But profitability is under pressure. Pre-tax profits fell 13.6% in 2024, with loan loss provisions surging 85.7% in Q3 alone. The cost/income ratio worsened to 49.9% from 47.8% in 2023, reflecting rising operational expenses and stagnant revenue growth. Meanwhile, the annualized cost of risk hit 0.32% (median), up from 0.20% a year earlier—a sign of heightened credit concerns.


This comparison could reveal whether the sector's valuation is outpacing or lagging behind market trends, offering clues about investor sentiment.

Key Drivers: Where the Growth Lies

1. The EV Revolution: A Tailwind for Automotive Leasing

The shift to EVs is a $12 billion opportunity in the EU's automotive leasing market. Governments like Germany and France are accelerating ICE vehicle bans, while consumers increasingly prefer leasing over buying due to EV's high upfront costs and residual value uncertainty.

Leasing firms are adapting by offering short-term leases and subscription models to mitigate residual risk. For example, Volkswagen Leasing (part of VOWG_p.DE) is bundling EV leases with charging infrastructure and maintenance, creating sticky revenue streams.

2. Healthcare and Renewables: Pillars of Sector Resilience

Healthcare and renewables are proving countercyclical. Hospitals and clinics are upgrading equipment, while wind and solar firms need financing for turbines and panels. Lessors like Siemens Financial Services (SIEGY) are targeting these sectors, leveraging long-term contracts to stabilize income.

3. Digital Innovation: The Next Frontier

The rise of online leasing platforms and AI-driven risk modeling is cutting costs. Companies using telematics (e.g., tracking vehicle usage) can price leases more dynamically. This tech push could narrow the cost/income gap over the next two years.

The Risks: Navigating Uncertainty

  • Residual Value Volatility: EV battery tech advances or policy shifts could destabilize secondhand markets.
  • Geopolitical Headwinds: Trade tensions and supply chain disruptions (e.g., in semiconductors for EVs) add operational risks.
  • Profitability Lag: Even with new business growth, margins are squeezed until cost efficiencies and rate cuts materialize.

Investment Thesis: Where to Play

The sector's long-term trajectory is bullish, but investors must navigate near-term pain for future gains. Here's how:

  1. Focus on EV Leasing Leaders: Companies like Volkswagen Leasing (VOWG_p.DE) and Arval (BNP Paribas) have scale and partnerships with OEMs to dominate EV markets.

  2. Sector-Specific Plays: Target lessors with heavy exposure to healthcare and renewables. Deutsche Leasing (part of DUAL1.DE) has strong healthcare ties, while EVO Payments (EVOP) offers tech-driven solutions for equipment financing.

  3. Monitor ECB Rate Cuts: Lower borrowing costs will ease financing pressures. A 2025 policy rate drop to 2.0% (vs. 2.5% now) could boost corporate investment and leasing demand.

Comparing these metrics could show whether leasing-specific risks are manageable or systemic.

Conclusion: A Sector in Transition, but Worth Watching

The European leasing sector is at a crossroads. While profitability struggles and risk metrics are flashing yellow lights, the tailwinds of EV adoption, digital innovation, and resilient sectors like healthcare and renewables are undeniable. Investors with a 3–5 year horizon should consider positions in firms that combine EV exposure with cost discipline. The sector's KPIs suggest it's not just surviving—it's evolving into a growth engine for Europe's green and tech-driven economy.

Stay tuned for the Q1 2025 Leaseurope Index; it could provide the final signal on whether this transition is gaining traction.