Vehicle leasing specialist Ariva had around a thousand cars on the road by the end of June, says MD David Smith.
Launched in 2012, Ariva is a joint venture between furniture entity, JD Group, and vehicle retailer, Imperial, and targets consumers turned away by traditional vehicle finance institutions. The company offers individual full maintenance rental contracts at a fixed price, which includes a service plan, insurance, roadside assist- ance and a tracking device, rather than ownership of the vehicle. (This mirrors the concept of full maintenance rental common with corporates.)

Smith says the product offering has seen some changes since its introduction, owing to customer demands.
Clients now only have to provide one month’s deposit and not two, as the money involved proved too draining on customers’ cash reserves.

Where the scheme previously targeted only private use buyers, it now also caters for commercial vehicles used by an individual, but over a shorter period of leasing than the private-user scheme. It also allows for more kilometres, in order to accommodate the demands of small businesses.

The age of used vehicles qualifying for the Ariva suite of products has also been increased from a maximum of 12 months to 18 months. “We may extend this again,” says Smith. “There is a lot of potential here as the used-car market picks up again.”

The value of the vehicle that can be acquired under the Ariva product banner has also jumped to R250 000, up from the R200 000 when the product was originally launched, with the possibility of R300 000 looming as new-vehicle prices increase rapidly, explains Smith.

The used-car contract runs for 48 months/100 000 km, with the passenger car contract running for 54 months/112 500 km, and the commercial vehicle rental contract for 44 months/132 000 km.

The majority of Ariva’s clients (90%) are private users, notes Smith, as was expected from the start.

One surprise, however, is that Ariva customers are not necessarily buying entry-level vehicles, says Smith.

“Our average monthly rental is R3 800, and not R2 800, as we thought it would be.”

Smith believes there is much room for Ariva to grow its numbers.
“We are on the cusp of seeing a softening in bank approvals for vehicle finance as people’s credit worthiness worsens.

“The leasing model is holding for us. We are still targeting consumers not approved by banks. I fish where the fish are.”
While Smith does not want to comment on Ariva’s approval rate, he does indicate that it “is significant”, considering that Ariva is looking at clients declined by banks.

He believes vehicle leasing, as opposed to ownership, will at some point become mainstream behaviour in South Africa.
“We rent houses and land in South Africa, but not cars. Isn’t it strange?

“A lot of what we do revolves around educating the South African consumer.”

Smith says the average vehicle finance contract term at banks is 68 months; how- ever, people trade in their vehicles at an average of 36 months, long before the payment terms are settled and the vehicle becomes their property.

“South Africans never really own their cars anyway. People’s behaviour talks of a rental system more than ownership.”
Another barrier to Ariva taking off has been people’s “very poor understanding of the cost of ownership of a vehicle”.

Smith says a recent talk at a graduate class revealed that graduate students thought of vehicle insurance as amounting to a few hundred rands a month, and not a thousand-rands-plus each month. They also had a poor grasp of how a typical instalment sale with a balloon payment works.

“My product is inclusive of all costs.”
Ariva has secured funding for 10 000 vehicles, says Smith.
“We hope to rent at least a further 1 800 vehicles by the end of June next year.”