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Vehicle leasing company aims to extend brand offering

VEHICLE LEASING Ariva offers individuals the opportunity to lease a new vehicle after three years without having to pay an expensive settlement price

VEHICLE LEASING Ariva offers individuals the opportunity to lease a new vehicle after three years without having to pay an expensive settlement price

Photo by Bloomberg

20th February 2015

By: David Oliveira

Creamer Media Staff Writer

  

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JSE-listed Imperial group affiliate and specialist vehicle leasing company Ariva is aiming to expand its vehicle brand offering for its leasing services division, says Ariva MD Keith Watson.

Currently, the company offers leasing agreements of up to 60 months on vehicle brands such as Kia, Hyundai, Renault, Toyota and Mitsubishi.

Watson tells Engineering News that leasing agreements offer individuals the opportunity to lease a new vehicle after three years without having to pay expensive settlement prices when trading in a bank-financed vehicle.

“Vehicles depreciate faster than what owners pay for a financed vehicle. Generally, consumers do not have the financial capacity to trade in their existing vehicle to buy a new model after three years, as the value of a vehicle depreciates after three years to such an extent that owners do not receive enough money to settle the remaining debt owed on a car,” he explains.

Watson says Ariva is trying to broaden consumers’ awareness of the benefits of leasing a depreciating asset and buying an appreciating asset.

“If a consumer is looking to buy a car for long-term use, then financing through a bank is the correct option. However, if a consumer wishes to trade in his or her car for a new model after three years, which 70% of vehicle owners do, then leasing would be a better option.”

Watson says leasing agreements provide a good business model for Ariva because, as a part of the Imperial group, the company can source vehicles at cheaper prices, lease them out and then dispose of them at better prices through Imperial’s dealer network.

“We have this model of asset life-cycle ownership that not only makes our business profitable but also prevents the customer from paying large amounts of money when they want to be released from the contract.

“Our model [shifts] the risk from the consumer to us,” he states, adding that vehicle leasing is commonplace in Europe and the US, comprising a significant and growing portion of the vehicle market in those regions.

Watson adds that Ariva’s leasing agreements also offer more consumers access to the vehicle market, as these agreements are offered at a competitive rate for consumers who are unable to secure financing from a bank.

“Because we take on more risk, we can offer marginal consumers – who [do not qualify for] vehicle financing – the opportunity to get a new car. This is possible because we are in control of the asset and are aware of when the car is serviced, if it was in an accident or if it is being driven badly. Essentially, we manage the asset, whereas banks have no control over the asset,” he concludes.

Ariva was established in 2011, with branches in Gauteng, the Western Cape and KwaZulu- Natal.

Edited by Samantha Herbst
Creamer Media Deputy Editor

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