Disposable mindsets are becoming a thing of the past, particularly in the realm of asset leasing. Across industries—from auto to construction to IT—both macro and micro marketplace forces are extending the lives (and potential profitability) of inventory.
For enterprises, the upside of extending the lives of equipment and vehicles is tremendous. But it also requires a new approach to leasing: one that focuses on the assets themselves rather than the contracts. This might sound like a nuanced shift in perspective, but it’s not. It has substantial implications for how organisations manage their inventory, their leasing agreements, and their customer relationships.
Let’s look at why modern leasing enterprises should consider pivoting to asset-based finance platforms and the benefits they stand to gain as they do.
Sustainability is good business
Around the globe, and especially in Europe, the move toward environmental sustainability has taken root both in the collective consciousness and regulatory reality. For example, the European Green Deal promotes clean-tech investments as part of the journey toward climate neutrality. Similarly, the Corporate Sustainability Reporting Directive (CSRD), the Sustainable Finance Disclosure Regulation (SFDR), and the EU Taxonomy are key ESG regulations that collectively form a crucial pillar of the EU’s sustainable finance strategy.
While environmental regulations could be viewed as a corporate burden, many companies are coming to realise that sustainability isn’t just a compliance issue—it’s a smart business strategy. One of the biggest drivers of waste today is the assumption that once an asset is no longer new, it loses its value. This couldn’t be further from the truth, whether from a consumer or business standpoint. Fortunately, more companies are recognising that extending the lifecycle of assets and their components—through reuse, refurbishment, or repurposing—presents a significant opportunity for both profitability and sustainability.
Regulations are pushing toward the ‘right to repair‘
Across the European Union and in some US states, “right to repair” legislation is gaining ground. These initiatives, intended to make it easier and more cost-effective for owners to repair devices and equipment, are focused on ensuring manufacturers aren’t putting unreasonable restrictions on extending the lives of products. In many cases, this means mandating that spare parts be made easily accessible and that independent repair providers be permitted to service equipment and devices. Over time, “right to repair” progress could extend the lives of certain types of equipment—farm and construction equipment, for example—indefinitely, like the legendary Ship of Theseus, by ensuring all components remain repairable and replaceable.
As the “right to repair” becomes a greater mandate across multiple categories, leasing organisations need to be able to put their assets at the centre of their worlds—because, quite frankly, they’re going to stick around longer than they have in the past. Financing platforms should be able to account for a given asset’s history across multiple owners, even as major repairs and refurbishments are required. In doing so, they can offer individualised service, while generating new streams of revenue from maintenance and parts replacement.
Assets (and components) are lasting longer by design too
In addition to the impact of “right to repair” on asset life, certain leasing categories are undergoing technology revolutions that are changing the very nature of the products themselves. This is perhaps most evident in the auto category, with the pivot toward electric vehicles.
Electric vehicles come with significantly higher price points than traditional internal combustion engine cars. However, their streamlined design and fewer mechanical components indicate that, with adequate upkeep, they could potentially outlast internal combustion engine vehicles. For automakers, adapting sales and financing strategies to meet the rising demand for pre-owned EVs presents a substantial financial opportunity. Additionally, these vehicles can be repurposed for rental fleets after completing their initial or secondary ownership cycles.
In a category like EVs, the benefits of an asset-based financing platform extend beyond the need to be able to account for a vehicle across multiple contracts. It can enable companies to individually track the components of a vehicle as well. For example, EV batteries can be repurposed for energy storage after their initial role in powering a vehicle. This is yet another way companies can capture more value from a single asset, so long as their systems enable transparency into the full lifecycle of an asset and its major components.
Platform flexibility and transparency drive efficiency
In addition to aligning with the ever-extending lives of vehicles and equipment, adopting an asset-based finance platform can help enterprises more-efficiently manage inventory and adapt contracts on the fly. For example, sometimes assets need to go offline for repairs or refurbishment. If a company’s financing platform only views assets at the contract level, the company will effectively lose visibility into an asset as soon as it’s not actively being deployed as part of a lease. This can lead to confusion, inefficiencies, underutilised assets, accounting irregularities, and lost opportunities.
Asset-based platforms can also provide organisations with the ability to adapt contracts in the wake of unexpected upheavals, such as product recalls. Quite often, equipment contracts might cover a variety of products or vehicles. If one model is affected by a recall but others aren’t, a contract-based system might require the cancelling and rewriting of the contract to make needed asset swaps—a time-consuming process that can further irritate customers who might already feel put out by a recall. With an asset-based system, swaps can be easily made because the full financial characteristics of each piece of equipment is managed individually. This compartmentalisation is also a useful efficiency enabler in cases where a client is looking to upgrade certain equipment within their existing contracts.
The days of disposable assets and rigid contract structures are fading fast, replaced by a new reality where assets live longer, change hands more frequently, and hold value in ways that traditional financing models weren’t built to handle. For asset finance companies, that means systems must be able to track not just contracts, but the entire lifecycle of an asset—through multiple owners, repairs, and even repurposing. The companies that win in this new landscape will be the ones with platforms that don’t just accommodate change, but anticipate it.
