The leasing industry has grown significantly in recent years as corporations look to cut costs and focus resources on core business activities. Leasing now covers a variety of products and services from office space to automobiles and commercial aircraft. It even includes trailers that can be used for cargo transportation or as a temporary office space. In addition, businesses can also receive significant tax benefits by leasing equipment.
One segment that will see the fastest growth during the forecast period is the open-end segment. This type of lease requires the lessee to make a single payment at the end of the lease period equal to the fair market value of the asset. These leases are mostly used for business purposes. For example, many transportation companies buy cars and vans on open lease.
The leasing industry accounts for nearly one-eighth of all private investment globally, although the proportion in OECD countries can be as high as one-third. In 1994, over US$350 billion worth of new equipment was financed through leasing. The modern leasing industry started in the United States in the 1950s and spread quickly to Europe, Japan, and the developing world.
The industry will experience a recovery in the coming years as a result of broad economic factors. These factors include declining investor uncertainty, rising corporate profits, and a decrease in office vacancy rates. This will result in a modest growth rate in industry revenue over the next five years.