Private Sector Leasing an OpportunityThu, 09/01/2016 - 14:06
Q: How has ABC Leasing penetrated the Mexican market?
A: ABC Leasing is solely dedicated to corporate and automotive leasing. The corporate division targets the equipment and transportation needs of medium-sized enterprises. Our Car Loan and Leasing Program (PROCAAR) focuses on SMEs and on individuals who engage in economic activities. By the end of 2015, ABC was managing a portfolio worth more than MX$5.7 billion (US$305 million). Of this amount, 62 percent was corporations, which make up 46.2 percent of our clients. Conversely, 38 percent of our business is PROCAAR, which represents 53.8 percent of our customers.
We issued our sixth bond in July 2016 for MX$1 billion (US$55.3 million), supported by Banamex, and we expect to launch our IPO within five years. Since our first bond issue in 2011, ABC Leasing has tapped the market five times. The company started in 2004 and in June 2005, ABC acquired Boston Leasing Mexico. This allowed us to incorporate a sophisticated information system, a high-profile portfolio and specialized staff. In 2009, the company formed a strategic alliance with Santander and ABC obtained a certification as Manager of Credit Financed Assets in 2011. The company agreed a capital investment of MX$300 million (US$16.1 million) from the Northgate Capital fund in 2015, when we started our commercial alliance with Scotiabank and began operations with INTL FCStone. We expect this will lead us to participate in bond issues in the US.
Q: How does the company maintain a healthy client portfolio in both its segments?
A: Our corporate strategy employs direct marketing to medium-sized companies, focused on cost-effective, highvolume operations and primarily based on bank funding. The strategy also relies on direct relationships with equipment manufacturers and distributors. Our Vendor Lease Program has been a successful attraction strategy as it focuses on leasing and added services such as maintenance, operation, spare part sourcing and training.
We launched PROCAAR in 2006 after detecting a significant need for this type of service. There are many leasing companies in the market but few participate at a national level. Information detailing these operations is limited, but JATO figures showed a promising future for these services. We have seven regional offices and 20 branches throughout the country plus our central office in Guadalajara. Our strategy is to work hand-in-hand with OEM dealerships. We have strategic alliances with Isuzu, Honda and GM. Even though it has its own leasing program, Nissan is one of the main brands we work with, alongside Honda, Mazda and GM. We also participate in the premium segment with MercedesBenz, BMW and Audi representing close to 33 percent of our portfolio.
Q: How does the PROCAAR program support ABC’s corporate segment?
A: Both segments are important for the company such that we are starting a program in partnership with NAFIN to support the SME market. Instead of solely focusing on vehicles we also try to offer a complete service encroaching on secondary equipment leasing. Private clients are still ownership-oriented but this is radically different when we present leasing to companies. Once customers realize the benefits it provides such as attractive prices and the possibility of eventual ownership, they are easily swayed.
Q: How has ABC Leasing innovated in its technology and services?
A: All our vehicles include a GPS system and we are developing a concierge app for our clients. This platform will show all the necessary vehicle data, including the vehicle contract, its location, insurance and measures to take in the case of an accident. It will also include a quotation system, which will be of great use to our sales force and all salespeople in the dealerships. The app will allow the client to have a much clearer idea of our products, as it will show down payments, rent and residual vehicle value. Companies look for a small down payment, low and tax-deductible rent payments and a high residual value, while private clients want a large down payment, low rent and a very low residual to keep the car at the end of the contract. Leasing benefits are not limited to the vehicle’s value, so we must consider all possible options so the client can reclaim as much tax as possible.