Changing Colombia’s mindset – don’t buy cars, rent them!
Corporate fleet customers in Colombia purchase vehicles outright. They’ve always done so – either with cash or through bank loans, FL (finance lease). Until recently, there were few options. But that’s all changing.
A lack of alternatives, alongside the high inflation rate (over 8% in Colombia in May 2016), gave the impression ownership was the better deal.
Companies like ALD, Arval, RDA Renting and others are setting up as the “change makers”, driving thetrend away from ownership to FSL (full service leasing), operational lease and fleet management.
Mareauto, AVIS licensee in Colombia, Peru and Ecuador sees the biggest opportunity for growth in OL (operational leasing), FM (fleet management) and STR (short-term rental).
Although there is low penetration of the operating lease, some providers have experienced double digit growth of late. Short-term rental has also surged in popularity in Colombia, largely due to tourism and an influx of rent-a-car schemes provided by Budget, Europcar, AVIS and the like who have engaged local companies as franchise licensees. It’s also popular in corporate use for replacement vehicles (while one is being repaired or serviced) and is included as standard in most operational leases.
The Colombian market is small in terms of corporate sales, fleet management providers and knowledge of the services available. But recent legal and taxation changes make the operating lease more competitive and efficient.
David Palmer, managing director, ALD Automotive Colombia, describes the situation: “Colombia is a reliable market with an emerging but well organized structure for professional and efficient fleet management and renting services.”
Dealer networks are showing an interest in corporate fleets. There is an incipient, independent network evolving. It’s reach is not yet wide enough to cover the whole country but it’s advancing.
Awareness and understanding about TCO and its true impact on fleet costs is surprisingly more common in Colombia. New approaches are highlighting the true costs, including maintenance (preventative and corrective), alongside insurance, fuel, fines and relief vehicles, associated with the old ways of fleet acquisition and management.
Unfortunately, Colombia has the world’s highest per capital fatality rate from road accidents (26 fatalities for every 100,000 inhabitants). 60% of the vehicles insured in Colombia are done so by international insurance companies. Insurance includes a deductible and a variety of services that can include driver safety programmes.
Changing cultural habits is never easy but as more businesses realize the benefits and cost savings from renting rather than owning vehicles, it may indeed happen.
Authored by Alison Campbell