Call to promote ‘circular economy’

Leasing companies should do more to educate lenders and buyers about the potential benefits of investing in pre-owned assets, and promote the concept of the ‘circular economy’, according to research by DLL, global provider of asset based financial solutions.

DLL says today’s business-to-business customers are mainly focusing on buying and selling new products. As a result, knowledge and understanding of pre-owned buyer behavior is limited.

However, DLL argues, there is an urgent need to rethink how today’s citizens produce and use assets due to the growing world population and the pressure on the planet’s finite resources. The lender claims that more and more companies and individuals see the necessity of a more regenerative economic model, more known as the ‘circular economy’ where products are recycled, reused or remanufactured at the end of the first life cycle. Selling and buying pre-owned products fit in this philosophy.

The circular economy relies on usage rather than ownership of assets. It enables manufacturers to maintain more control on their assets throughout the technical cycle and offers the potential for product services to become an increasingly important profit center for manufacturers. New service-based financial solutions such as leasing and pay per use are enabling manufacturers to do so.

DLL conducted a survey with substantial number of customers that have leased pre-owned assets through DLL in the Dutch construction, transportation and agriculture industries, in order to gauge interest and activity in this area.

The research concluded that factors driving organizational buyers to acquire pre-owned products are the price-quality ratio, available funds for investments, and value depreciation. The latter is less for pre-owned products, as a significant part of the investment value is already lost to depreciation when the asset leaves the showroom.
Additionally, immediate availability and the level of flexibility and asset knowledge are guiding buyers towards pre-owned products, even as the level of risk associated with the purchase decision would appear greater.

Guidance for dealers

“Based on these findings we advise manufacturers and dealers to approach new- and pre-owned buyers differently”, says Rob van den Heuvel, senior vice president global asset management at DLL. “Taking into account their needs, and as such, perceived objectives will positively contribute to their ultimate expected buying behavior.”.

Van Den Heuvel adds, “Although new and pre-owned buyers are often compared as separate entities, it is important to realize that these aren’t exclusive titles. The truth is that the new and pre-owned buyer is often the same person purchasing a mix of assets, over time and varying needs, that best supports their business”.