Tjahny Bercx
View from the Top

Leasing Increasingly Popular for Fleet Owners of All Sizes

Mon, 09/01/2014 - 13:26

Q: How has LeasePlan’s presence in Mexico evolved over the past five years?

A: LeasePlan is the largest fleet and mobility service provider in the world, with over 6,500 employees worldwide. We service 32 countries with a fleet of 1.37 million cars, representing total assets of US$26 billion. We have been present in Mexico for five years but only recently finished our startup phase. We now have 11,000 units in Mexico and have been growing very quickly in this market, so much so that we are the fastest growing unit within LeasePlan Group. Our business focus is offering fleet management and driver mobility services. By pre-financing and taking all measurements to manage and control fleets, companies can benefit by utilizing that capital for other important investments and focus on their core business.

Q: What distinguishes LeasePlan’s product portfolio from other fleet and mobility service providers?

A: We are the only leasing company worldwide that offers Open Calculation. Open Calculation means reducing fleet total cost of ownership (TCO) while companies obtain full and transparent insight into their fleet’s costs by only paying for the actual fleet usage. The actual costs incurred are reconciled to the budget; this means that companies only pay for what they actually use. Secondly, the open book approach offers full insight into and full control of the company’s fleet. A third important item is that there is no risk on residual value and maintenance. LeasePlan takes all the risk. Finally within Mexico, we are the only leasing company that also offers Gestoría services. Mexico has 32 states that have their own regulatory environment, requirements regarding registration and de-registration of cars, road tax, and environmental inspections. Within Gestoría, we also support our customers with police statements and legal representation needed in case of incidents such as accidents, lost documents, fines, and vehicle repossession. Next to a series of products and our solid financial position, it is our Open Calculation product and Gestoría offering that really distinguishes us from other fleet providers.

Q: What trends are you seeing for leasing demand in Mexico?

A: The primary trend is the need for better understanding of a company’s fleet in terms of administration and control. The second main issue is that clients are asking how to structurally reduce costs, and last but not least, they want to know how to manage the headache of the many regulations they face here. A lot of companies buy the cars to form their own fleets. This represents a huge investment and is the second highest cost for those companies after personnel. However, with the fiscal reforms, more companies are becoming interested in Operational Leasing to reduce their overhead costs. What transnational companies are experiencing is that purchasing the vehicles is not the only cost. They must also account for ongoing maintenance and insurance costs, not even mentioning the residual value risks. In Mexico, one of the biggest headaches for companies is fleet management. Managing the different regulations about license plates and taxes of all the different states can be extremely complex, so they turn to service providers like us to take care of it through programs like ‘Gestoría’. LeasePlan can take care of its customers’ fleet management, even for those that do not necessarily lease our units. Fleet management is a huge endeavor requiring paperwork, constant interaction with the authorities, and exacting knowledge of the federal and state regulations.

Q: What are the peculiarities of the Mexican market and how has LeasePlan adapted its products?

A: In Mexico, a car is seen as an asset that is to be bought and kept. Instead of using a leasing company that offers pre-financing and provides the opportunity to use the investment elsewhere, the companies would rather buy the vehicle. After a certain time, companies sell the vehicles at an attractive rate to their employees, making it an additional employee benefit which almost 95% of employees accept. There is a huge part of the Mexican population that does not have a car, so when the opportunity to buy a cheap car is presented, they take it. But over time, a shift is taking place, especially in times of crisis when companies need to reduce overhead costs. Fleets are among the first areas to be targeted, so the state of a market will lead to companies deciding whether to lease or purchase their fleets. We are now seeing more customers approaching us to achieve cost savings, completely cutting out the practice of buying vehicles. Changing this mindset can represent millions of savings. However, companies want to continue to offer their employees the benefit of purchasing the car, so we offer them the opportunity to buy the cars from us at a low price. We are able to do this as the businesses have already paid the difference in the residual value. When we create the solutions, we calculate the possible loss and include that within the price of the leasing. We are fully transparent about this approach when we discuss options with businesses.

Q: What are the added benefits and challenges of offering an entire product and service range?

A: LeasePlan is involved in the leasing process during the whole life of the car. This starts with the pre-financing by sourcing the money for companies to borrow at low interest rates. That is followed by the purchasing of the cars and the establishment of solid relationships with dealerships and repair shops. It is important to develop these relationships so as to obtain good price levels for components and services. We also provide insurance with good coverage across the whole of Mexico, and training for the drivers. Our most important services are centered on TCO. We do account management for the companies, which means we show them the whole scope of their fleet management from license plates, vehicle damages, and money spent on maintenance and components. After that, we offer advice on how to manage the costs. For example, if a company uses a certain brand of tires but is spending too much on replacement, we offer an alternative brand which will see the fleet functioning better while we can obtain discounts from the new tire company. These sorts of services come under TCO management. Another important service is car selection, and we help companies to find the car or model that best suits their needs. If one of our customers uses a certain brand but the vehicles are constantly taken to the workshop, when the time comes to renew the fleet, we point out the spending levels and offer an alternative that will better meet their needs. When offering TCO management services, it is imperative to have full knowledge of the cars, maintenance, car usage, and all the dealerships that are trying to sell the units. Sometimes a more expensive car brand will suit a company much better than a cheaper car. With all these variables included in our service portfolio, our data warehouse is huge. Everything that happens to the cars is in our system. We have GPS services that can track the mileage, and customers also track the car to know if the proper routes are being followed. We remove all the pains of fleet management. As a company with 1.37 million cars, we have far more bargaining power and we can obtain better deals on vehicles and components than a company that has 1,000 cars.