Luminor Bank warns leasers that the Euribor interest rate may considerably affect their payments across their entire lease contract term.
After several years the interest rate exceeded the zero threshold this year. To battle rapid inflation growth, the European Central Bank (ECB) raised the interest rate more rapidly than previously expected. This will have an impact on housing loans and car, equipment and machinery leasing.
Nevertheless, the rapid price rise in the car market has gone down.
«This ear the market remains influenced by the long delivery terms of new cars, the ongoing car price rise and the Euribor rate increase. The majority of lease contracts signed for the procurement of cars, equipment and machineries were signed with variable interest rate. This means the monthly payment amount is affected by Euribor changes, and leasers have to carefully consider their ability to pay back their loan across the entire lease period,» noted Luminor Leasing Office head Raivo Bāle.
In a time when Euribor rate remained low and client purchased a car worth EUR 25 000 in lease for five years with 10% first installment and 2.14% rate, the monthly payment reached EUR 396.
With Euribor rate up, the monthly payment may increase by approximately EUR 17 to EUR 22, depending on whether the lease contract was signed for three or six-month Euribor rate.
Compared with last year, car prices, depending on the model, have increased by an average of 10% to 30%.
The long delivery terms for new cars promote demand for used cars. This is why the prices in second hand market have increased by up to 30% when compared with 2021.
Due to limited offers, some clients decide not to return leased vehicles to dealers after the end of the lease term. This significantly limits the influx of cars to the second hand market, which also causes the price rise.
«There is no shortage of challenges related to the economic situation. This slows development and investment plans. Although the car price rise has become slower, with fuel, electricity and other costs up, manufacturing costs are up as well. This results in continued rise of car prices. At the same time, the car industry expects improvement for delivery terms, which would have a positive effect for used cars. However, currently it is difficult to predict how quickly this could happen,» predicts Bāle.
According to information from Finance Latvia Association, approximately half of all new lease contracts were signed for the purchase of new cars. One-third of contracts were signed for the purchase of machinery, including agricultural or construction equipment. The rest were signed to procure commercial vehicles.
Luminor Bank’s data indicates the average purchase price of new cars purchased in Latvia has increased from EUR 29 230 to EUR 33 672 this year. For businesses, prices have increased from EUR 34 430 to EUR 36 914.
Limunor Leasing informs that this year’s most popular car models picked by private clients include Toyota RAV4, Nissan Quashqai and Dacia. Businessmen most often pick Renault Master or Renault Trafic, as well as Toyota RAV4.