Challenges Ahead for Mexico’s Leasing MarketBy Alejandro Enríquez | Tue, 03/17/2020 - 08:39
Arrendomovil shares the advantages of fixed monthly leasing payment, as well as the impact of austery policies in Mexico's vehicle market
Q: How does being part of Grupo Autofin México help Arrendomóvil stand out in the Mexican market?
A: Our mother company, Grupo Autofin México, has more than 50 vehicle dealerships and several multibrand repair shops in Mexico. The group works with almost all volume brands present in the country, which results in significant vertical integration. When clients hire our services, Arrendomóvil purchases vehicles at Grupo Autofin México’s dealerships and offers aftersales services, including repairs, preventive and corrective maintenance. We offer competitive rental services to banks and companies of all sizes and also cater to the needs of the federal and some state governments.
Thanks to our relationship with Grupo Autofin México, we have much stronger bargaining power when buying vehicles and services from OEMs than standalone leasing companies, which enables Arrendomóvil to negotiate better payment terms, discounts and extended guarantees. Additionally, having several brands in our portfolio gives us an edge over the leasing branches of OEMs. We can lease everything from a small car worth MX$150,000 (US$7,800) to a truck worth MX$4 million (US$210,000), which not every leasing company can offer.
Q: How do Arrendomóvil’s fleet management and leasing services complement each other?
A: The combination of Arrendomóvil’s pure leasing and fleet management service is called renting or full service. We offer clients the possibility to combine the advantages of each service to provide a solution that caters to their vehicle needs. Our main goal is to be seen as a trustworthy outsourcing option and a single supplier that eliminates any redundancy within our clients’ operations, particularly with large companies and the government. Depending on client needs, Arrendomóvil delivers a more or less complex renting service that covers insurance, accident management and even fuel in certain cases.
Q: How will the federal administration’s austerity policies impact Mexico’s vehicle market?
A: The Mexican economy is slowing down. Considering that the government is the largest user of leasing services, these policies are not only impacting vehicle sales but also leasing companies. Deceleration in public expenditure and investment is natural whenever a government enters office but we expect greater dynamism as the government develops its plans. Job cuts will reduce the fleet size further but we expect to continue supporting this segment, which represents 40 percent of our operations.
Q: What challenges has Arrendomóvil faced to market its pure leasing services?
A: Even though vehicles depreciate, Mexicans and Mexican companies usually prefer to own their vehicles and fleets despite the tax deductibility opportunities. Professionals registered in SAT as individuals with business activities can deduct up to MX$6,000 (US$310) plus VAT each month, which makes leasing a competitive option. At the same time, millennials are not interested in owning their vehicles and prefer to adopt mobility options rather than buy cars. Although this shift is taking longer in Mexico than in more advanced economies, it will provide opportunities for leasing companies.
Q: What advantages do pure leasing services enjoy in the face of adverse macroeconomic trends?
A: A fixed rate can be favorable because it offers certainty regarding a company’s monthly costs for the duration of the contract. This is also an advantage for leasing companies as users of these services are usually better clients than those with bank loans. Arrendomóvil has two main pure leasing products: a variable rate directly tied to Mexico’s Interbank Interest Rate Balance (TIIE) and a fixed monthly rate that offers clients certainty on how much they will pay each month for their vehicles.
Q: What are the most effective arguments to convince potential clients of the advantages of leasing over vehicle ownership?
A: First, deductibility of leasing expenses is key to convince potential clients to give leasing a shot. Second, Arrendomóvil’s lease and rental solutions provide clients with significant cost reductions thanks to the discounts that Grupo Autofin México’s dealerships provide to Arrendomóvil, which are then passed on to clients. Finally, Arrendomóvil focuses on delivering quality customer service through our specialists in fleet management. These executives offer support to clients in case of an accident or any other difficulty.
Arrendomóvil is the leasing subsidiary of dealership and financing company Grupo Autofin México. The company specializes in fleet management, renting and full-service leasing