1. LEASING A MODERN FINANCING ALTERNATIVE

2. CONTENTS Leasing – conceptual approaches The leasing market in Romania
Leasing versus banking credit

3. Leasing defined Method of payment for the use of an asset
Different from renting
A party undertakes to transfer for a determined period of time to another party the right to use an asset against a regular payment
The right of option

4. Leasing – conceptual approaches
Definition:
Parties:
lessor/the financer (locator/finantator)
lessee/the user (locatar/utilizator)
supplier (furnizor)
insurance company (companie de asigurari)

5. Mechanism of leasing
1. A leasing contract is signed between the Lessor and the Lessee 2. The Lessor pays the purchase price to the Supplier 3. The equipment is delivered to the Lessee 4. The Lessee pays lease rentals determined by contract to the Lessor.

6. Application for leasing
a short presentation of the evolution of the company’s activity and of the managing team’s experience;
copies of the constitutive acts of the company;
a balance sheet revised by the Ministry of Finance;
the balance for the last month;
the patrimony’s situation;
the business plan for the financing project;
the credits situation and payables;
the forecasted cash-flow over the location period

7. Main types of lease operations
Financial leasing
transfer of risk
transfer of ownership right
lessee’s option
usage period
Operational leasing
none of the above

8. Types of lease operations
short term leasing
medium term
long term
direct
indirect
lease-back (sale and lease-back)
buy-back
personnel leasing
experimental
time-sharing
international (external) leasing
internal leasing

9. LEASING terms Economic life (viaţa economică) :
the period along which a certain good is estimated to be economically usable by one or more users; or
the number of the production units or similar units that are estimated to be obtained through using the good by one or more users.
leasing rate / royalty (rata de leasing - redevenţă) :
in case of financial leasing: the due quota of the entry value of the good and of the leasing interest (the average rate of the bank interest on the Romanian market);
in case of operational leasing – the quota for amortization calculated according to the normative acts in force and a benefit established by the contracting parties
entry value (valoare de intrare)
-is the value at which the good was acquired by the financing party, the cost of acquisition respectively.
residual value (valoare reziduală)
the value at which, at the expiry date of the leasing contract, the transfer of the right of property over a good by the user is done.
total value (valoare totală)
- the total value of the leasing rates to which the residual value is added.

10. Advantages of leasing
financial statements are not "loaded" with expenses (just the monthly royalty)
- credibility
- future financing contracts
ease of scheduling the expenses
easy replacement of depreciated goods
no need for supplementary guarantee
rapidity of the approval of the operation process

11. Disadvantages For the lessee
Equipment is not operational under the whole period of the contract
The cost of the leasing
The ownership of the good
For the lessor
-goods can be damaged after the first lease
-royality delayed

12. Comparing leasing and credit
Ensures the investment’s financing
No other collateral requested
Supplementary collateral
Financial statements do not include liabilities to banks
Financial statements include liabilities to banks
Duty fees are paid at the residual value
Duty fees are paid at the entire value of the good
Advance required
Advance payment

13. Leasing and renting Criteria Leasing Renting
Computation of according to the according to the existing
the installments acquisition price of the good conditions on the market
(including quotas of it) and represent the equivalent
some predefined elements they of the usage right
(interest, profit, VAT, a.s.o.).
The ownership
Right At the end of the lease period The rented good cannot
the good may go into the go into the posession of
posession of the lessee based the tenant at the end
on the paid rent and a residual of the location (unless
price a sale-purchase
contract is being signed).

14. Leasing market in Romania - short hystory
1994 – the first Romanian leasing company
1996 – ASLR (Association of leasing companies in Romania)
two conditions imposed by law
-object of the activity leasing
-registered and paid capital of 500 million ROL
331 companies, 213 sent documents to the BNR to be registered as IFN (after new regulations Norm 28/2006)
100 active , 33 members of ASRL (48% of the market) – 38 in 2005
total value of contracts concluded by ASLR members was 1175 mil. Euro, and the value of financed goods was 920 mil EUR.

15. Leasing market in Romania -structure
Leasing companies affiliated to banks (8%)
Leasing companies affiliated to some producers or product suppliers (17%)
Independent leasing companies (75%)

16. Leasing market in Romania -structure
Companies providing financial leasing -56%
Companies providing operational leasing -7%
Companies providing both types of leasing -37%

17. Leasing market in Romania -structure
FINANCIAL LEASING –members of ASLR
OPERATIONAL LEASING - members of ASLR
9 months 2006
9 months 2005
first 9 months of 2006
first 9 months of 2005
national
cross-border
No of contracts
91.22%
1.51%
95.8%
0.9%
2.87% -
3.2%
Value of goods
87.51.%
3.74%
95.7%
1.5%
2.42%
2.8%

18. Leasing market in Romania -structure

19. Top 15 leasing companies according to the value of the contracts in 2004
Porsche Leasing Romania
17.87%
AFIN Romania
15.85%
BCR Leasing
12.99%
RCI Leasing Romania
10.62%
Tiriac Leasing
9.20%
Motoractive
6.97%
Eurial Leasing
4.88%
TBI Leasing
4.51%
Romstal Leasing
4.03%
Ager Leasing
2.69%
Romexterra Leasing
1.83%
DRT Leasing
1.30%
Auto Italia Impex
1.22%
Toyo Motor Center
1.20%
Atlassib Leasing
1.04%

20. Structure of contracts according to their object

21. Structure of the leasing market according to the duration of the contract
3-5 years - 54%,
1-3 years - 43%
5-8 years – especially real estate leasing

22. Real Estate leasing – feature and trends
less than 2-3% of the market, an increasing trend compared with 2005
No major changes in 2006
18% in Western Europe (even Poland 13%)
An increasing trend for big companies

23. Real estate leasing evolution: factors
Increased competition of the banks
Leasing term < mortgage credit term
Most companies do not have a well determined risk portofolio
MTS leasing fraud
Lack of information

24. Perspectives and trends on the market
The features of market leasing in Romania
Legal framework
Non-banking financial institutions status is still unclear
Low level of investment in Romania
The new Ordinance 28/2006 -social capital to Euro and joint stock companies
-report to national bank – supervision authority
-risk provisions and solvability
the number of companies will decrease (2500 to …)
-new legislative measures – VAT at the total value of the installment
- duty fees at the total value not residual
-new conditions for the customers
Price of goods through leasing will be higher
The experience of other countries – in France or Germany - similar with credit institutions
- Great Britain – commercial law
- Italy – similar with Romania

25. Leasing market Europe (billion euro)

26. Chapter 4: Leasing versus bank credit
comparison between the acquisition of a good through leasing and through bank credit
object: Dacia Logan Laureate
price: 6, Euro (without VAT)
institutions: BCR (Banca Comercială Română) and BCR Leasing

27. Comparison tables: leasing versus credit
Period of the leasing contract – months 48
Currency
Euro
Price (no VAT)
6,785.73
Advance (15-50% of the price no VAT ) -20%
1,357.15
Financed value
5,428.58
Interest rate
10.50 %
Residual value
139.02
Leasing installment (no VAT)
138.99
Management commission
135.71
Value of the contract
8,164.41
Total cost
9,479.49
Period of the credit contract – months 48
Currency
Euro
Price (no VAT)
6,785.73
Advance- 25% of the total value of the car
2,041
Bank loan (75%* total value)
6,123
Interest rate
12%
Residual value -
Credit installment
161
Management commission
169.62
Value of the contract
7 668
Total cost
9,878.62

28. Conclusions and recommendations
Legal persons – management will prefer financing through leasing, as it does not increase the degree of financial leverage of the company
Natural persons
If: Advance payment for leasing + leasing installments > Advance for credit + credit installments => choose bank credit
If: Advance payment for leasing + leasing installments < Advance for credit + credit installments => choose leasing

29. Conclusions and recommendations
final cost
advanced payment
Guarantees
Monthly installment
Fiscal advantages
Other conditions imposed to the borrower

30. Thank you for
your attention!