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Fleets in Mexico to customise finance

In Mexico, owning a vehicle is a way of expressing corporate success. This asset-driven culture explains why most companies still prefer to buy their fleet. However, things have been changing since a few years.

Today, some 20 percent of companies opt for outsourcing, either in the shape of open end lease (fleet management) or close end (operational) lease.

Stepping stone towards closed end
It is hardly surprising that U.S. companies stick to open end fleet management. This allows the fleet client to purchase the vehicles and rely on the expertise of fleet management companies for the complete servicing part. Its main advantage is that it offers cost transparency – something companies reportedly ‘need’ as a stepping stone towards European-style closed end leasing, i.e. a full-scale outsourcing.

The latter may seem expensive at first, but once a customer has a clear view on the TCO, there is a good chance he will appreciate that operational lease is perhaps the better solution – not least because it is off-balance, offers budget stability and eases the operational and administrative burdens.

Some might argue that apart from transparency, fleet management offers savings. In Mexico, however, the market and the volumes are considerably smaller than in the U.S. On top of that, copy-pasting U.S.-made partnerships is not always the way forward, as in many cases they only exist on paper in Mexico.

Low RVs
So, after international companies with a European HQ, large Mexican corporations, too, are starting to see the advantages of European-style full service close end leasing, which is growing faster than the market: it brings ease of mind and externalizes the risks of ownership and of remarketing the fleet vehicles.

Or does it? In Mexico, company cars are mostly sold to the driver of the car when the contract expires by way of a bonus. Basically, there is no remarketing risk: the clear majority of Mexico-based fleet clients deliberately ask for a low residual value-setting, so the car can be purchased at more interesting prices than a similar car on the open market. Neither in Europe nor the U.S are such practices in line with regulation.

In a nutshell: whether a Mexican company opts for open end fleet management or close end operating lease, there is no difference as far as remarketing is concerned.

Betting on two horses & specialisation
Indeed, most players on the Mexican fleet market offer both operational lease (closed end) and fleet management (open end) as a product to their clients. Interestingly, obtaining a clear view on the market is difficult as vehicles are sometimes registered both as a leasing car and a car under a fleet management contract.
 
French lessor ALD Automotive and American lessor Element Fleet Management are the biggest players on the Mexican operating lease market, managing some 25,000 vehicles each. Even though their core business remains full service lease, they were flexible enough to also offer fleet management services adapted to local preferences – and be successful at that. The biggest ‘local’ player, with some 15,000 vehicles, is Ariza, a joint-venture between Corporation Zapata and U.S.-based fleet management company ARI.

A relatively new but important phenomenon is that the authorities and public organisations are equally turning towards outsourcing. The reason behind this is budgetary. Interestingly, it is mainly local lease companies that specialise in this area. 14/06/2017  |  Dieter Quartier

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