The volume of new business in January–September 2017 amounted to about 710 billion rubles, which is 58% higher than the same period last year (see Chart 1). It is worth noting that in the third quarter of this year, the value of property leased/rented reached 285 billion rubles, which is 63% higher than the results of July–September last year. According to a survey of leasing companies, an increase in the volume of leasing business for 9 months of 2017 was shown by two-thirds of respondents, who together account for more than 90% of the market in terms of leasing business volume. At the same time, not a single lessor from the top 20 was characterized by negative dynamics in the volume of new business. The reason for such active market growth was the execution government programs for leasing/rental subsidies individual species transport against the backdrop of the realization of pent-up demand from customers. The government's preferential leasing programs provided support, first of all, to the transport segments, whose share in the volume of new business reached about 78% in the first 9 months of 2017, compared to 72% a year earlier.
It is worth noting that due to state programs to subsidize leasing/rental, primarily of domestic aircraft and vehicles, the market grew by 160 billion rubles, which is about 23% of new business. Thus, the growth of the leasing market without taking into account government support programs, according to our estimates, would be about 53%.
Confirmation that the leasing market has moved from recovery to growth is not only the positive dynamics of the volume of new business, but also the fact that for the first time since pre-crisis 2013, the number of employees of leasing companies began to grow. According to RAEX (Expert RA) estimates, based on the results of the survey, as of October 1, 2017, the number of personnel of leasing companies is at least 11,300 people, which is 15% more than a year earlier (see Chart 2).
The amount of new leasing agreements for January – September 2017 amounted to more than 1.1 trillion rubles compared to 680 billion rubles a year earlier, and the volume of the leasing portfolio as of 10/01/2017 reached 3.3 trillion rubles (see table 1). The volume of payments received in the three quarters of 2017 amounted to 680 billion rubles, which is slightly more than last year. The average ratio of lease payments received to the portfolio as of 10/01/2017 was 43% versus 44.2% as of 10/01/2016. The average portfolio turnover of companies specializing in the retail segment remained at the level of last year (about 46–47%), however, for lessors working with large and expensive equipment, this figure decreased from 30 to 23%. The reason for the decline in this level was the active increase in operational leasing transactions in the last two years, in which lease payments are distributed unevenly, and the bulk of the debt falls on the end of the contractual terms. In addition, a number of large players had problematic clients in their portfolio, whose non-payments led to a drop in the flow of leasing payments. In this regard, during 2016–2017, contracts with problem clients were terminated, which led to a short-term drawdown in the portfolio size of individual leasing companies.
Table 1. Leasing market development indicators
| Indicators | 9 months 2014 | 2014 | 9 months 2015 | 2015 | 9 months 2016 | 2016 | 9 months 2017 |
| Volume of new business (property value), billion rubles. | 522 | 680 | 385 | 545 | 450 | 742 | 710 |
| -10,4 | -13,2 | -26,2 | -19,9 | 16,9 | 36,1 | 57,8 | |
| Amount of new leasing agreements, billion rubles. | 754 | 1 000 | 590 | 830 | 680 | 1150 | 1 140 |
| Growth rate (period by period), % | -19,8 | -23,1 | -21,8 | -17 | 15,3 | 38,6 | 67,6 |
| Concentration on the top 10 companies in the amount of new contracts, % | 61 | 66 | 68 | 66 | 62 | 62 | 68 |
| Retail index, % 1 | 45 | 44 | 45 | 44 | 50 | 45 | 48 |
| Volume of lease payments received, billion rubles. | 550 | 690 | 465 | 750 | 670 | 790 | 680 |
| Volume of funds financed, billion rubles. | 505 | 660 | 400 | 590 | 550 | 740 | 635 |
| Total portfolio of leasing companies, billion rubles. | 2 950 | 3 200 | 2 950 | 3 100 | 2 900 | 3 200 | 3 300 |
| Russia's GDP (in current prices, according to Rosstat), billion rubles. | 57 277 | 79 200 | 60 393 | 83 233 | 61 967 | 86 044 | 64 912,3 |
| Share of leasing in GDP, % | 0,9 | 0,9 | 0,6 | 0,7 | 0,7 | 0,9 | 1,1 |
Source:
The retail index, calculated as the sum of the shares of retail segments, in the volume of new business decreased from 50% in January–September 2016 to 48% compared to the same period of the current year. The reduction in the index was due to a significant increase in the volume of new business in large segments, which led to an increase in the average amount of a leasing agreement from 6.2 million rubles to 8.8 million rubles. At the same time, the number of leasing agreements concluded during 9 months of 2017, according to agency estimates, was at least 130 thousand (see Chart 3).
The volume of financed funds for 9 months of 2017 increased by 15% compared to the same period last year. In addition to the increase in the volume of funding sources, structural changes have occurred. Thus, during the period under review, the share of bank loans in the structure of financed funds decreased by 4 percentage points, to 56.6%, however, loans still remain a key source of financing leasing transactions. During the first 9 months of 2017, it was noted that lessors in to a greater extent began to rely on advance payments, the share of which is 14.4% (+2.2 percentage points compared to the same period last year), and the share of own funds, on the contrary, decreased by 2.5 percentage points, to 10.6 %. The share of bonds in the structure of financed funds reached 10.5%; it is worth considering that this level is largely provided by the company "GTLK", which actively uses bond issues to finance the leasing business. Without taking into account STLC, the share of bonds in sources of financing leasing transactions for 9 months of 2017 would have been 4.3%, which slightly exceeds last year’s level (see Chart 4).
According to a survey of leasing companies, the average level of profitability of 2 leasing businesses at the end of 9 months of 2017 was 4.3%, which corresponds to the level of 2014. The return of the margin to the pre-crisis level indicates a decrease in the concerns of lessors regarding their clients; leasing companies have begun to include credit risks in the leasing interest to a lesser extent. The highest margins were shown by companies specializing in construction equipment, passenger cars and trucks (the maximum margin reaches 14%). The lowest difference between the cost of attracted and placed funds (about 1.5–2%) is typical for companies working with leasing of railway and aircraft equipment. The profit margin of the business of lessors whose owners are foreign owners has fallen over the past three years by 2.3 percentage points, to 3%. As a rule, lessors under foreign structures work with imported equipment, which has become significantly more expensive due to the devaluation of the ruble, which forced leasing companies to reduce the margin in order to maintain client base. It is worth noting the increase in the margin of leasing companies with Russian banks (+1.4 percentage points, up to 4.6%), which is largely due to the lag in the revision of the leasing interest rate after the reduction in rates on attracted loans to the leasing company. Therefore, the reduction in the Bank of Russia rate has not yet fully affected the cost of leasing.
Dynamics and structure of operational leasing
In January–September 2017, the volume of operational leasing amounted to about 147 billion rubles, which is 263% more than the results of the same period last year. In addition, the volume of operating leasing achieved in 9 months of the current year is the highest in history Russian market leasing In general, based on the results of the first three quarters of 2017, rental accounted for about 21% of the volume of new business versus 12% a year earlier (see Chart 6). The share of rentals in the leasing portfolio also increased significantly to 17.4% as of 10/01/2017 against 5.3% as of 10/01/2016.
The concentration on leaders in the new operating leasing business is much higher than in financial leasing: for example, the top 3 lessors account for 72% of the market (see Table 2), while the share of the three largest companies in financial leasing is 37%. The high level of market concentration on a limited range of leasing companies is associated with the specifics of operating leasing, which is more in demand by large clients. This type leasing is in demand by corporate clients, as it allows for more flexible management of the transport fleet in conditions of instability and does not oblige you to purchase the property at the end of the contract.
Table 2. Top 10 leaders in terms of operational leasing volume
| № | Company name | New business for operational leasing / rent for 9 months. 2017, million rubles | Share of operational leasing in new LC business, % | Company share in the operational leasing market, % |
| 1 | "SBERBANK LEASING" (GC) | 55 536 | 54,5 | 37,8 |
| 2 | "VEB-leasing" | 25 677 | 45,5 | 17,5 |
| 3 | State transport leasing company | 24 810 | 27,4 | 16,9 |
| 4 | "TransFin-M" | 14 269 | 58,9 | 9,7 |
| 5 | "RAIL1520" (GK) | 7 841 | 100 | 5,3 |
| 6 | "Transleasing service" | 6 065 | 100 | 4,1 |
| 7 | "Major Leasing" | 1 356 | 18,0 | 0,9 |
| 8 | Gazprombank Leasing (GC) | 1 055 | 4,8 | 0,7 |
| 9 | "Option-TM" | 582 | 59,2 | 0,4 |
| 10 | "KAMAZ-LEASING" (GK) | 329 | 6,3 | 0,2 |
Source: RAEX (RA Expert), based on the results of the LC survey
The operating leasing segment based on the results of 9 months of 2017 is mainly formed by railway and aircraft equipment; these segments together account for about 97% of all leases (see Chart 7). Support for operating leasing aircraft in 2017, it was primarily due to government subsidies for rental payments. “Without government support to subsidize the rental of domestic aircraft, regional aviation will not be viable. All over the world it is, one way or another, supported by the state. Another question is what measures state support should not relax manufacturers, who should strive to reduce costs,” notes Vladimir Dobrovolsky, Deputy General Director for Customer Relations of PJSC State Transport Leasing Company.
In an operating lease, the use of the leased asset is limited to the term of the contract, which allows the lessee to quickly replace the equipment in the event of its obsolescence. In addition, a decrease in interest rates due to a revision of the Bank of Russia key rate will help increase the attractiveness of operating leasing. “As the interest rate decreases, the efficiency of leasing increases, since the interest burden on the entire investment decreases,” notes Kirill Tsarev, CEO JSC Sberbank Leasing. – In operational leasing, due to the large balloon payment, the percentage influences more significantly than in financial leasing. And the lower the interest, the more competitive the operating leasing offer becomes.”
Market leaders
Based on the results of 9 months of 2017, the market leader was Sberbank Leasing JSC, which increased the volume of new business by 163%; a year earlier, the company was in third place in the ranking. The second place in terms of the volume of new business in the leasing market is held by PJSC State Transport Leasing Company, and the third position in the ranking is occupied by VTB Leasing. As before, there is a high concentration of the market on the largest lessors, which continues to grow. Thus, based on the results of three quarters of 2017, the top 3 leasing companies account for about 37% of new business (35% a year earlier). It is worth noting that the business of the three largest players forms 88% of the aviation segment, 38% of railway leasing and a quarter of the truck leasing market. The share of the top 10 in the volume of new business in January–September of this year increased from 64 to 67%, and the 20 largest lessors already accounted for 80% versus 78% a year earlier.
Table. Top 20 market leaders based on the results of 9 months of 2017
| Place for new business | Company name | Credit rating RAEX (Expert RA) as of 12/06/2017 | Volume of new business (property value) for 9 months. 2017, million rubles | New business growth rate 9 months. 2017 / 9 months 2016, % | Amount of new leasing agreements for 9 months. 2017, million rubles | Volume of the leasing portfolio as of 10/01/17, million rubles. | |
| 01.10.2017 | 01.10.2016 | ||||||
| 1 | 3 | "SBERBANK LEASING" (GC) | 101 980 | 163 | 132 174 | 397 241 | |
| 2 | 2 | State transport leasing company | 90 492 | 55 | 180 070 | 490 797 | |
| 3 | 1 | "VTB Leasing" | 67 377 | 7 | 104 295 | 394 295 | |
| 4 | 4 | "VEB-leasing" | 56 393 | 115 | 82 488 | 344 620 | |
| 5 | 5 | "LK Europlan" | ruA | 42 087 | 63 | n. d. | 52 552 |
| 6 | 7 | ||||||
Kirill Kirilin
When creating a lease payment schedule Special attention is given to reflecting the leasing company's income in the calculation. A clear concept of the lessor's income in Russian leasing practice has not yet been fully established. Different leasing companies may call the income included in the calculations differently. In leasing practice, there are such names of income of a leasing company as margin, remuneration, profit, net profit. In the future in this review, it is proposed that the leasing company’s income included in the calculation of leasing payments be called margin.
There are two main approaches to forming a leasing company’s margin:
1) the lessor includes the company’s net profit in the calculations and adds income tax to it. Also, the leasing company may separately allocate not the entire amount of income tax, but only the amount of the so-called mandatory income tax, calculated on the basis of the lessor’s costs paid from net profit (for example, such costs may be interest on a loan in excess of the norms established by Article 269 of the Tax Code). Code of the Russian Federation);
2) margin refers to “dirty” profit, from which the leasing company pays income tax, but this tax is not separately taken into account in the calculations, but “sits” in the margin.
Theoretically, the leasing company’s margin can also be called the entire amount of excess of leasing payments over the value of the property. It is assumed that with this approach, the margin includes interest on borrowed funds, taxes, other expenses, as well as the lessor’s own income. However, this interpretation of the leasing company’s margin does not seem correct, since it does not reflect the profitability of the leasing operation.
For any of the above margin formation options, the following methods can be distinguished for calculating the total margin amount:
1. The margin amount is calculated as a certain percentage of the initial cost of the leased property; this amount is not adjusted taking into account the lease term.
2. The margin amount is calculated as a certain percentage of the initial cost of the leased property, this amount is adjusted taking into account the lease term (usually multiplied by the number of years during which the lease agreement lasts).
3. The margin amount is calculated as a certain percentage of the loan balance. In this case, a certain value is added to the interest rate on the loan, which forms the lessor’s margin. In this case, the total amount of interest on the loan and the margin is sometimes called leasing interest.
4. The margin amount is calculated as a certain percentage of the residual value of the leased property at each point in time during the lease agreement. In this case, the size of the margin depends on the leasing term and the calculation algorithm is similar to the algorithm for calculating property tax.
5. The margin amount is calculated as a certain percentage of the amount of the leasing agreement or the amount of all costs of the lessor under the leasing agreement.
6. The margin amount is a fixed amount. This algorithm can be used, for example, when leasing the same type Vehicle, as well as inexpensive equipment, when the lessor fixes a minimum margin amount.
When negotiating before signing a leasing agreement, the lessor and lessee usually negotiate the leasing company's margin rate. In this case, the parties should immediately pay attention to three aspects when discussing this issue:
The leasing company indicates the margin rate, which already includes VAT, or the rate excluding VAT;
The leasing company indicates the margin rate to which profit tax is added in the calculations, or a rate that already includes profit tax;
What is the basis for calculating margin.
Let's assume that the parties have agreed that the margin rate does not include VAT on the margin and includes income tax for the leasing company. Let's consider what amount the lessor's margin will be at the same absolute rate based on the above methods of calculating it. Let the margin rate be 4%, the term of the leasing agreement is 3 years, the cost of the leased asset is 118,000 units including VAT (book value is 100,000 units), the rate of the loan attracted by the lessor is 14% per annum, the loan term is 3 years, loan repayment is made monthly in equal parts (under these conditions, the amount of interest on the loan is 25,468 units). The results of margin calculations are presented in Table No. 1.
Table No. 1 shows that the same margin rate can amount to a different absolute amount of the lessor’s income based on different methods of calculating the margin. You can also note that all methods of calculating the margin given in table No. 1, except for the first and fifth, record the dependence of the margin on the term of the leasing agreement. This can be considered a correct relationship, since the lessor provides services to the lessee throughout the entire leasing period, and not at a specific point in time. The first and fifth methods do not take into account the time factor, while the first method is often more understandable and simpler for the lessee and is therefore widely used in practice, the fifth method is somewhat more complex and is used less frequently.
The lessee will always strive to understand the absolute size of the leasing company's margin and, if possible, try to reduce it. On the contrary, a leasing company always tries to increase its own income. Thus, a certain market level of profitability of leasing operations is formed, at which this financial instrument becomes mutually beneficial for each party.
There is too much railway equipment in Russia for the transportation of goods, but the demand for it has not yet been greatly affected by this: transportation volumes are still growing, and retired equipment must be replaced with new ones. However, now leasing companies should think about expanding their business, for example, financing transactions for the acquisition of locomotives.
Working with railway rolling stock, primarily freight cars, is a pleasure: it is a reliable asset, with a long life, a low level of technical risks, and high liquidity. “That is why leasing companies are willing to invest in them, and banks lend to their buyers. At the same time, supply on the market is still limited, so prices for cars are at a high level,” says Dmitry Bovykin, executive director of the leasing company RAIL1520.
Sergey Dianin, general director of the leasing company Arval, agrees with him. The risk component associated with such a leased item as a railway car is minimal. When assessing lessee clients operating in this segment, one should note the high reliability of these companies, he says.
Of course, all these advantages result in lower returns compared to investing in other types of assets. But demand is guaranteed, says Maxim Agadzhanov, General Director of Gazprombank Leasing CJSC. It significantly exceeds supply for the last ten years, as a result of which prices also increase. “Of course, during the crisis, prices for wagons were almost halved, and this affected not only new, but also used equipment. Many manufacturers were forced to reduce production volumes, but since 2010, the market has been actively recovering, as a result of which wagons are again a scarce asset with growing cost," he notes.
Financing for leasing companies railway transport- these are, first of all, large volumes, which allow you to significantly increase your portfolio. Such transactions cannot be compared, for example, with the motor transport segment in terms of margin: the volume of financing and the rate of return are not comparable.
However, it is possible that the optimistic situation in the railway sector may change to a somewhat alarming one. Currently, the freight car fleet in Russia reaches 1.1 million units, which is a historical record in the entire history of the country. Will all the available rolling stock fit on the existing rails and will there be a load for the entire fleet?
On the one hand, cars are purchased based on volume - existing contracts or, at least, for possible future clients who will appear with a high degree of probability. In other words, the equipment that industrial and transport companies now have was purchased for some more or less specific needs. Industrial production in Russia is not falling and is even slowly recovering to pre-crisis levels, therefore, there is nothing to worry about.
On the other hand, the need for wagons depends not only on the volume of cargo presented, but also on how efficiently they are managed. The more efficient, the fewer cars will be needed to transport large volumes of goods, resulting in a reduction in the need for rolling stock. Without going into industry details, we note that over the past seven months the Ministry economic development, the Ministry of Transport and JSC Russian Railways took a number of steps that led to the optimization of car flows on the railway network. This increased its productivity and thereby reduced the need for equipment, reduced empty mileage by 12 times, and stabilized the rates that had been growing until now. transport companies and in general virtually eliminated the shortage of rolling stock - a situation that over the past ten years has only been observed during the crisis. According to estimates by Russian Railways, there are currently about 50 thousand surplus carriages in Russia.
Moreover, the next steps to optimize railway transportation are outlined. Does this pose a threat to lessors? “We can say that in the segment of freight cars the market is already saturated and we are moving to the stage of only replacing equipment that has outlived its useful life. The wear and tear of cars in Russia is not very significant. The main peak of demand for the universal fleet has passed, and the current composition from operators, on this moment“almost completely meets their needs,” believes Vladimir Dobrovolsky, director of business development of the State Transport Leasing Company (STLC), expressing, however, confidence that STLC’s portfolio in the segment under discussion will still grow. Mr. Agadzhanov from Gazprombank Leasing, in turn, draws attention to the lack of significant innovations in Russian railway transport that can optimize the economics of transportation. “The emergence of such innovations, and a number of rolling stock manufacturers are currently working on them, can cause a new wave of demand and contribute to the development of rolling stock leasing,” I am sure he. Calm and Dmitry Bovykin from RAIL1520. According to his assessment, there are currently 390 thousand cars with expired service life in operation in the CIS. By 2020, the market will need at least another 700 thousand units to replace retired rolling stock and ensure traffic growth. “Fluctuations in demand are inevitable, but overall it will remain at a high level,” says the expert.
But even if the worst forecasts come true, leasing companies have room to grow. The reform of Russian railway transport provides for the involvement of private business not only in the management of wagons, but also in other sectors, primarily repairs, as well as locomotive facilities (traction rolling stock) and infrastructure - tracks, stations and terminals.
Let us note that there are still heated debates about giving the right to companies other than Russian Railways to operate locomotives, although the state’s position on this issue is, in principle, positive. But one way or another, a certain number - albeit insignificant - of private diesel and electric locomotives in the country are already operating on certain routes or non-main routes, and businesses are already actively studying the issue of acquiring their own traction.
It is the sector of traction rolling stock that Mr. Bovykin calls promising. The locomotive fleet is outdated, both physically and morally, and requires updating. In addition, there is already a physical shortage of them to ensure the transportation of the increased fleet of cars. “At the current stage of reform of the railway industry, the participation of private investors is still limited, but potentially the liberalization of traction could create a new leasing market comparable in size to the wagon market,” says a representative of RAIL1520.
Gazprombank Leasing is considering with great interest the financing of railway depots, traction stock and various special equipment for access roads, admits Mr. Agadzhanov. The point is that for corporate clients Among the industrial enterprises with which the company prefers to work, the creation of transport infrastructure is an urgent task - this is required by the volume of transportation and transshipment of goods, in addition, this approach allows us to establish a kind of closed cycle.
Mr. Dobrovolsky is more careful. He admits that the fleet of locomotives is already 70% worn out (by the way, freight cars are only 40%), traction is indeed in great short supply, which makes the segment very interesting in the future. "But for now this is only a theory. The locomotive park on the tracks common use Currently owned and operated by Russian Railways. If liberalization is carried out in this direction and private carriers are released onto public tracks, the locomotive segment will be in great demand,” shares the top manager of the State Transport Leasing Company.
Apparently, in the future, a comprehensive strategy for working with clients will give leasing companies good results: start with financing transactions for the purchase of cars, and then, when the lessee grows up, you can help him with the purchase of a locomotive and equipment for servicing the entire rolling stock. With skillful management, a railway carrier in Russia will not remain without profit. As practice shows, the shortage of transport and throughput leads to the fact that cargo owners are willing to pay more just to guarantee the removal of goods and not violate contract terms. In the medium term, the situation will definitely not change much.
Alexey Strigin
Goal: compare methods of acquiring fixed assets and choose the most profitable one. How to proceed: consider the terms of the transaction, compare the costs and benefits of various financing instruments, calculate the effective interest rate.
Credit and leasing are the two most accessible and common ways of acquiring property through debt financing. The conditions for attracting him using these tools are largely similar. In both finance leases and bank loans, the borrower must pay part of the cost of the property—usually 10 to 30 percent—either himself or post a deposit. When attracting bank financing, this is called “participation with own funds”, and when leasing, it is called “advance”. Both the leasing company and the bank will require to insure the property that is the subject of the transaction, which in the first case is the property of the lessor, and in the second, as a rule, acts as collateral.
If we talk about the main expenses, then in both cases they will include payment of the principal debt, interest and bank commissions, since the leasing company will also receive a loan to purchase equipment. However, being, in essence, an intermediary between the bank and the client, the lessor will add its margin to the cost of services.
As for taxation, in the case of concluding a leasing transaction, the company applies an accelerated depreciation rate, thereby reducing the amount and timing of payment of property tax, while when attracting bank financing, fixed assets will be depreciated, reducing the income tax base. When leasing, income tax savings are achieved due to the fact that all payments are included in the cost price. A significant difference between financial leasing and lending is that VAT is charged on leasing payments. And with a loan, payment of the principal, interest and bank commissions is not subject to this tax; it is paid by the borrower when purchasing property and is credited after putting the fixed asset into operation.
Leasing margin and tax effect
Typically, the choice of financing instruments is made based on a simple calculation of costs and the amount of savings in property taxes and income taxes. All other things being equal, preference is given to the cheapest way to attract financial resources. Comparison absolute indicators expenses and tax savings is a simplified approach that does not take into account a number of important points. But the main difficulty when comparing bank lending and financial leasing is that lessors offer their clients only the final payment schedule for consideration and, as a rule, do not disclose the internal cost of financing and the size of the margin that is included in leasing payments. Therefore, the author proposes to determine the most profitable way to purchase property based on the effective interest rate. But first, let’s compare leasing and lending by simply calculating the amount of payments and comparing the tax effect. This is helpful to understand the lease payment structure and tax implications of the two financing options. The initial data are shown in Table 1. They approximately correspond to the average market conditions for bank loans and leasing transactions.
Table 1. Conditions for financing a transaction for the purchase of equipment
| Basic conditions | Credit | Leasing |
| Cost of equipment including VAT, thousand rubles. | 11 800 | |
| VAT, thousand rubles | 1800 | |
| Depreciation group | 5 | |
| Term beneficial use, month | 85 | |
| Repayment of principal | Monthly, in equal installments | – |
| Interest rate, % | 13 | |
| Leasing margin, % | – | 4 |
| Property tax rate, % | 2,2 | |
| Participation with own funds / advance, % | 20 | |
| Financing term, months | 29 | |
| Accelerated depreciation rate | – | 3 |
To simplify calculations, a number of assumptions are made in the conditions:
- the cost of attracting credit resources for the organization and the leasing company is the same;
- The leasing margin is given as an example. In practice, it is usually not disclosed. Often the margin is more than 4–5 percent, especially in retail transactions (for example, financing the purchase of vehicles);
- the advance payment in case of acquisition of fixed assets using credit resources and leasing is the same;
- The loan is repaid by the borrower monthly in equal payments;
- the costs of insuring the leased item are also the same, but in the calculation example they are not taken into account;
- the period was chosen based on the full depreciation of equipment during leasing for 29 months, taking into account the use of an accelerated depreciation coefficient equal to 3. While in practice it is often lower, and for property of the first–third depreciation groups it is not applied at all (in this regard leasing of property belonging to the first–third depreciation groups, is usually more expensive than a bank loan, unless the leasing company receives a discount from the supplier. This is how the marketing ploy “Leasing at 0 percent” develops).
In our calculations, we assume that the lease payment (excluding VAT) is equal to the loan payments, increased by the leasing company’s margin and the amount of property tax (we assume that it is paid by the lessor). In other words, the task comes down to comparing what tax preferences give us and what they “take away” leasing margin. The following results were obtained (calculations are presented in Tables 2 and 3). Property tax savings in case of purchasing equipment under a leasing scheme during the leasing period will amount to 175 thousand rubles, over 85 months (depreciation period) - 513 thousand rubles. The difference in income tax savings for 29 months will also be in favor of the leasing scheme and will amount to 1212 thousand rubles, and the total effect, taking into account the deduction of the margin, will be 915 thousand rubles. Once the lease agreement expires, there will be no income tax savings. At the same time, depreciation continues to accrue on the loan, and eventually (at the end of the depreciation period) the saving effect will be reduced to 33 thousand rubles.
table 2. Calculation of annual income tax savings for loans and leasing, rub.
| Year | Credit | Leasing | |||||||
| Redemption main debt |
Pay percent |
Depreciation | Tax on property |
Saving tax at a profit ((2 + 3 + 4) × 20%) |
Leasing payment without VAT |
Incl. margin |
Incl. tax on property |
Saving tax at a profit (6 × 20%) |
|
| 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | |
| 1 | 3 906 207 | 994 816 | 1 411 765 | 204 471 | 522 210 | 6 785 630* | 305 986 | 174 483 | 1 357 126 |
| 2 | 3 906 207 | 485 478 | 1 411 765 | 173 412 | 414 131 | 4 029 009 | 149 738 | 83 448 | 805 802 |
| Total in 29 months |
9 440 000 | 1 533 278 | 4 235 294 | 440 971 | 1 241 909 | 12 271 111 | 472 000 | 265 833 | 2 454 222 |
| 3 | – | – | 1 411 765 | 129 412 | 308 235 | – | – | – | – |
| 4 | – | – | 1 411 765 | 98 353 | 302 024 | – | – | – | – |
| 5 | – | – | 1 411 765 | 67 294 | 295 812 | – | – | – | – |
| 6 | – | – | 1 411 765 | 36 235 | 289 600 | – | – | – | – |
| 7 | – | – | 1 411 765 | 6902 | 24 910 | – | – | – | – |
| Total in 85 months |
779 167 | 2 462 489 | 265 833 | 2 454 222 | |||||
*In the first year an advance is included.
It would seem that the benefits of using a leasing scheme are obvious, especially if discounting is applied. But on the other hand, the situation looks somewhat different, because we not only do not take into account the time value of money, but also lose sight of the moment of VAT refund.
table 3. Calculation of the effect of using a leasing scheme in comparison with a loan by year, rub. (simplified approach)
| Year | Tax savings on property Art. 4 Tab. 2 – Art. 8 Tab. 2 |
Tax savings at a profit Art. 9 Tab. 2 – Art. 5 Tab. 2 |
Effect* Art. 10 + St. 11 – Art. 7 Tab. 2 |
| 10 | 11 | 12 | |
| 1 | 29 988 | 834 916 | 558 917 |
| 2 | 89 963 | 391 671 | 331 896 |
| Total for 29 months. | 175 137 | 1 212 314 | 915 451 |
| 3 | 129 412 | –308 235 | –178 824 |
| 4 | 98 353 | –302 024 | –203 671 |
| 5 | 67 294 | –295 812 | –228 518 |
| 6 | 36 235 | –289 600 | –253 365 |
| 7 | 6902 | –24 910 | –18 008 |
| ... | ... | ... | ... |
| Total for 85 months. | 513 333 | –8267 | 33 067 |
* Total savings on property tax and income tax minus the leasing company's margin.
Construction of cash flow and calculation of EP
Leasing companies usually offer the borrower a final payment schedule for consideration, which includes all costs for purchasing property - bank interest and their own margin, but without details. The financial director of an enterprise can easily compare the conditions for purchasing property in several leasing companies, taking into account payments and the size of the advance, but comparison with a loan offer is difficult for the reasons mentioned above.
To solve this problem, you can use the effective interest rate (EIR). This is a value that allows you to compare different cash flows. It should be noted that EPS is not a rate of return and does not indicate how much interest the borrower will pay for a loan or lease. But with its help you can compare various ways financing and conclude which one is more expensive and which one is cheaper.
When determining the effective interest rate central bank RF previously recommended using financial function Microsoft Excel programs CHISTVNDOH (in the English version - XIRR). The methodology for calculating EPS is given in the Microsoft Excel Help.
Let's compare loans and leasing using the effective interest rate using a conditional example, using data from the same table 1.
To calculate EPS, it is necessary to take into account all income and expenses by type of financing. The procedure is as follows. First, schedules of expenses are drawn up - payments for leasing and loans, taking into account advances and payments for property tax. Then the income is summed up (receiving a loan or paying for equipment with funds from a leasing company), and adjustments are added - income tax savings and VAT refunds. The difference between income and expenses is the cash flow, on the basis of which the effective interest rate is calculated. Next, the Microsoft Excel function NET INDEX is applied, and the results obtained are compared. The financing method with which the effective interest rate is lower is selected. EPS can take completely different values, including negative ones, but it is important for the company to compare them and choose the smallest one.
When calculating the cash flow of the first month (see Table 4), income is taken into account, which means the amount of financing in the amount of 9,440 thousand rubles.
table 4. Calculation of cash flow taking into account savings on income tax and VAT refund, monthly, rub. (extract) *
| Month | Credit | Leasing | |||||
| Expenses borrower |
Saving on tax at a profit |
Monetary flow |
Expenses leasing recipient |
Saving on tax at a profit |
Test (possibly tion) VAT |
Monetary flow |
|
| 1 | –2 360 000 | – | 8 880 000 | –2 360 000 | – | 360 000 | 7 440 000 |
| 2 | –444 608 | 47 348 | –397 261 | –502 930 | 99 035 | 76 718 | –327 176 |
| 3 | –444 161 | 47 258 | –396 903 | –500 630 | 98 646 | 76 367 | –325 617 |
| 4 | –437 221 | 45 870 | –391 351 | –490 669 | 96 957 | 74 848 | –318 864 |
| 5 | –436 418 | 45 710 | –390 708 | –487 949 | 96 496 | 74 433 | –317 020 |
| 6 | –432 486 | 44 923 | –387 563 | –481 538 | 95 410 | 73 455 | –312 673 |
| 7 | –423 136 | 43 053 | –380 083 | –468 734 | 93 239 | 71 502 | –303 992 |
| ... | ... | ... | ... | ... | ... | ... | ... |
| 86 | –108 ** | 23 551 | 23 443 | – | – | – | – |
| 5,72% | Effective interest rate | 4,39% | |||||
* All expenses (for a loan - participation with own funds, repayment of the principal debt, interest, property tax, for leasing - advance payment, lease payment with VAT) are calculated in strict accordance with the payment dates. Receiving a loan - 9440 thousand rubles, offset (reimbursement) of VAT on the loan - 1800 thousand rubles.
** The lease agreement has expired - lease payments are not paid, and in the case of a loan, property tax payments and income tax savings due to depreciation continue, which will be included in the calculation of the effective interest rate.
In the example given, the effective interest rate for cash flows is 5.72 percent for loans and 4.39 percent for leasing. This means that in this case, raising funds from a bank will cost the company slightly more than leasing financing. If the leasing company’s margin is more than 4–5 percent, then a financial lease will be more expensive than a loan. In other words, under given conditions (20% advance, term - 29 months), property leasing is unprofitable if the difference between the interest rate on the loan and the cost of financing from the lessor (lending rate + margin) exceeds 4-5 percent.
Let's change the initial conditions and calculate the effective interest rate to evaluate the same methods of acquiring property belonging to the seventh group with a depreciation period of 181 months. The total funding amount remained the same. As a result of the calculations, the following data were obtained: for bank lending, EPS will be 13.34 percent, for leasing – 12.38 percent. Thus, a finance lease of equipment for 60 months under the newly specified conditions is more profitable than a loan, since the effective interest rate is lower.
Comparison of financing instruments based on the effective rate can be applied to the wide variety of lending and leasing conditions that exist in the market. The calculation results may be different, but there are no standards for the value of EPS, so you need to take into account the ratio of indicators, and not their specific value. In addition, when choosing a method for attracting credit resources, non-financial conditions are also taken into account, such as efficiency, flexibility and customer focus of the lending bank or leasing company.
table 5. Initial data for the purchase of equipment
Attached files
Available to subscribers only
- Excel file with payment schedules, expense and effective interest rate calculations.xlsx
08:03 18.03.2014
While the real sector continues to groan from interest on ruble loans, things are by no means better in leasing. This is understandable. To provide an item for financial lease for Belarusian rubles, you need to get these rubles from somewhere.
Usually Belarusian rubles are taken not from the Baltic, but from Belarusian banks. Leasing companies use the same credit funds as enterprises in the real sector. Of course, if the lessor - regular customer Belarusian bank, then the latter will “gladly” give him a discount of 1-2%.
But a couple of percent will not make the lot of the lessee any easier. They can generally be hidden by the leasing company’s margin - everyone wants to live. And then at the end the leasing rate will be equal to the loan rate plus 2 or 4% of the leasing company’s margin. Let it be a conditional 42% per annum.
This rate can be found in some leasing companies in Belarus, which are called banking companies.
Let's assume that you are lucky and you find a certain leasing company at a bank that offers you 42% per annum. We take the scales and begin to weigh all the pros and cons.
Leasing for the bravest
Suppose we need to buy a server (such a big, big and very powerful computer) SunFire E2900B, which is offered by Belarusian companies for 1.182 billion rubles including VAT.
For example, we agreed with a leasing company on a 2-year contract and an advance payment of 20%, but here we must remember that the size of this payment can be 25 or even 30%. How do you agree?
We pay the lessor 236.5 million rubles at a time, and then make monthly differentiated payments. In the first month we will pay 78.6 million, the last leasing payment, in two years - only 41 million. But that’s not all.
Classically, the redemption payment will remain at 1% of the cost of the equipment - 11.82 million Belarusian rubles.
As a result, after 24 months, the server will become your full property. What will we have as a result, besides outdated computer hardware? The equipment will cost 1.684 billion. The overpayment will be 502 million rubles with a tail, or 42.5%. Go ahead.
Will pseudo-dollars save the world?
If we convert the cost of our SunFire E2900B server into dollars, it will be 121 thousand. The conditions remain the same as for leasing in rubles: 20% advance, 1% residual value, differentiated repayment system. But…
The overpayment will be 25 thousand pseudo-dollars, or 20.2%.
It doesn’t take a financial genius to understand that comparing the 42.5 and 20.2% increase in the cost of a server, a combine, or a molecular meat grinder is pointless. Although leasing offers in Belarusian rubles exist.
If you call a leasing company and insist on leasing in Belarusian rubles, they are unlikely to argue with you. The client's desire is the law. And the equipment will be leased to you.
Only devaluation will help us
What are the arguments in favor of ruble leasing?
Oddly enough, this is an opportunity for the same notorious spasmodic devaluation. Everyday calculation is simple. You take a server worth 121 thousand dollars in February 2014. The price of the equipment in Belarusian rubles is 1.182 billion and is fixed in the contract.
If at the beginning of July this year the Belarusian ruble exchange rate suddenly depreciates by 250%, you will find yourself in the same financial conditions as the company that leased the same server for pseudo-dollars.
If the Belarusian ruble exchange rate behaves the same as in 2011, you will even benefit. But who said that you can enter the same water twice?
Two of the lessee's worst nightmares
True, in all this seemingly simple everyday scheme there are several subtle places.
Read the text of the leasing agreement carefully. If the lessor took out a bank loan at a floating interest rate, this will certainly be reflected in your agreement. The leasing rate, since you still decide to lease in Belarusian rubles, should be fixed.
Let's explain a little. The rate will be fixed if the text of the document states in black and white: “The rate is 42%. And cannot change in the future."
When the agreement is decorated with the phrases: “The rate is equal to 1.79 of the refinancing rate” or “The leasing rate in the first month is 42%, and in subsequent months it is formed by agreement of the parties,” it is better not to waste the ink in your pen on signing such a paper. Then you will have to regret it.
But the horror stories for the lessee do not end there. If, after all, you have signed a contract with a fixed rate, you should not relax. The bank that issued the loan to the leasing company may well ask it to move a little, by 5 - 10%.
“Listen, cousin is the lessor. As a financier - to a financier. Times are tough now, it is prohibited to issue loans, the population does not bear deposits. Let us raise your loan rate by 7%, like that toy factory that went bankrupt the day before yesterday.”
After such words, there is usually a game of nerves: who will win... And if the leasing company raises its paws up, then it lowers them down and dials your phone number: “Hello. Times are tough now..."
However, we admit that this is a completely extreme case. Force Majeure.
The bisector that destroys hopes
Let's return to those lucky ones who, unlike us, entered into a leasing agreement in pseudo-currency.
Let us remind you that a transaction in pseudo-dollars implies that all payments will be made in Belarusian rubles at the rate of the National Bank on the day of payment. This is where the wormhole lies.
Many experts note that devaluation is already underway in Belarus. And it is called a smooth devaluation. If you look closely at the growth of the dollar, it, obeying some kind of magic wand, no less than Harry Potter, is growing with enviable pedantry, by 10 rubles per day of the exchange’s operation. Let's see what happens to the dollar exchange rate with such an “exchange” acceleration in 24 months.
The resulting “bisector” indicates that if events continue to develop as they have been developing for the last six months, in February 2016 the dollar exchange rate will come close to the 15 thousand mark or will increase by 53%.
With this development of events legal entities, who leased the SunFire E2900B server for pseudo-dollars, will pay approximately 1.7 billion Belarusian rubles. We will omit complex multi-page calculations. But if we do not discard errors with exchange rate differences, then the size of leasing payments is the same as in the case of leasing in Belarusian rubles.
And it turns out the same collection of antlers on the wall. Only a profile view.
Therefore, both supporters of transactions in Belarusian rubles and supporters of transactions in pseudo-currency should once again remember that leasing is beneficial not by the size of the rate (although it also matters), but by the possibilities of depreciation and tax benefits.
While writing the article, approximate mathematical models were used that do not take into account certain nuances, such as the need for insurance, possible changes in legislation, bankruptcy of the bank that issued the loan to the leasing company, and the presence of a leap year. However, all these factors are also not taken into account by leasing companies when drawing up payment schedules that they offer to their clients for consideration.
All economic forecasts made in the article are not fully forecasts, since they are used to model situations that may occur with some probability or may not occur at all.
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