How to Mitigate Ownership Risks

The CEO of TIP Mexico, a leaders in cargo equipment and vehicle leasing, shares his strategies on making the most out of leasing schemes.

Q: What are the most important factors powering Mexico’s vehicle-leasing market?

A: Companies in Mexico that were previously unaware of the advantages that vehicle leasing offers are now giving this scheme a shot. The main allure is the tax benefits it offers in the form of deductibility and the smaller initial and monthly installments compared to vehicle loans. This is also attractive for companies with limited cash flows who find it hard to make a down payment of 20 to 25 percent of a vehicle’s price. Instead, they can pay the equivalent of two to three monthly rents as deposit and take a new car home.

Considering that approximately 70 percent of all vehicle sales in Mexico are on credit, there are many opportunities for leasing to grow. TIP México is betting on communicating the advantages that leasing offers to grow with the market. We also remain close to clients, dealership groups and even OEMs to get more people to try leasing. To differentiate from competitors, TIP México offers value-added services such as fleet management services, which we tailor to the client’s needs. For instance, we may include vehicle maintenance, insurance or telematics in our proposition. TIP México also offers schemes to improve the deductibility of clients’ leasing products, as well as consulting services to help clients understand how to make the best out of their leasing agreement.

Q: How are the federal administration’s austerity policies impacting the leasing market?

A: The public sector is moving away from ownership and leaning toward leasing. The federal administration has launched two large calls for bids to lease the cars that public officers will use. These tenders are attractive because they offer the chance to market more than 12,000 vehicles in a single transaction

Q: How can TIP México meet in the middle with clients who prefer ownership over leasing schemes?

A: TIP México offers clients a right of first refusal on the sale of leased vehicles. We give our clients the option to purchase the unit at a certain value when the leasing contract expires. We also offer a bonus for returning the unit after the end of the leasing agreement, which entices them to trade in used vehicles for new ones in a restructured leasing scheme. This is particularly attractive among younger generations.

Considering that approximately 70 percent of all vehicle sales in Mexico are on credit, there are many opportunities for leasing to grow."

Q: How can leasing foster the adoption of hybrid and electric vehicles in the Mexican market?

A: There is still a great deal of uncertainty regarding the practicality of EVs, their components’ lifespan and the vehicle’s residual value. All these factors prove to be an advantage for leasing over purchasing. Not only is deductibility of an EV or a hybrid greater than that of a regular combustion engine car, but leasing helps drivers to only pay for the use of the vehicle and to mitigate the risk of owning a product that has not matured in the Mexican market. Depending on the customer’s needs, it is possible to lease an EV for 12, 18 or 24 months and keep the car if it meets their expectations or return it if it does not. Additionally, it is possible to add chargers and other accessories as part of the leasing agreement and these are also tax deductible.

Q: What are the most important advantages that TIP México offers to transportation companies?

A: First, we offer immediate availability of trailers. We have a large and diverse cargo fleet, so transportation companies can lease between one and several hundred trailers in a few hours. Second, we are flexible when it comes to lease periods. Transportation companies can lease units for anywhere between one day and seven years. Finally, all our units meet the new regulations for road-based freight transportation: NOM-044 and NOM-012. We also have repair shops giving maintenance to over 3,000 units per year.

Q: How does TIP México help transportation companies improve their operations?

A: Cash flows in the Mexican transportation industry have faced several constrains as a consequence of rising fuel prices, unfair competition and low transportation tariffs. Additionally, new regulations for road transportation will increase the prices of trucks. TIP México has focused on supporting clients with sale and lease-back schemes, pure leasing contracts with lower monthly payments and fleet renovation programs at a better price. 

TIP México is a leader in cargo equipment and vehicle leasing, as well as fleet management, with more than 26 years of experience. The company has a fleet of more than 26,500 units and offers national coverage through commercial offices in 19 cities