Rental with purchase option continuing to gain in popularity in Morocco
Currently vehicle financing business is a tough business, but an attractive one for the fleet customer: banks, finance companies and car manufacturers’ captive leasing companies are trying to outdo each other in terms of ingenuity in order to satisfy clients.
Credit at 0% from one, highly attractive finance solutions from another, right up to offering very appealing formulas such as zero deposit allied to very low monthly repayments of less than 1,000 DH (around 90 Euros). The healthy level of sales can also be explained by assistance from manufacturers to facilitate financing. The finance houses, however, cannot match the finance tariffs of the banks because they themselves obtain finance through this channel. But they can match other criteria such as length of contract and level of fees in order to rebalance the equation. In all cases, these institutions have a classic offering in their portfolios, and rental with purchase option.
Car dealers have done all they can to ensure that credit is less expensive and more accessible. And indeed, 70% of clients seek help from specialised institutions to buy cars. The proportion of credit sales continues to rise thanks to adapted formulas negotiated between the credit houses and the vehicle dealers. The Auto Hall group, for example, which represents the Ford brand in Morocco, and credit institution Wafsalaf, launched Ford Salaf in March of this year in order to provide made to measure finance solutions. The idea is that clients can choose, buy and finance their car without leaving the Auto Hall site. This partnership also offers a financing formula for the maintenance contract and guarantee extension, all together in a single monthly payment. In its first financial year, Ford Salaf expects to handle a credit volume of 450 million DH (42 million Euros).
The credit houses unquestionably owe their recovery to loans made for car purchases, which are recording growth of 34% to 6.3 billion DH (590 million Euros). This performance is allied to the good state of health of the car market which has been noted this year for the Motor Show which took place in Casablanca in May. Car sales have in fact increased by 28.7% to 121,350 units over the first 10 months of 2016. It should be noted that the popularity of rental with purchase option among buyers, observed for the past few years, is confirmed. This finance solution has grown by 61% to 3.3 billion DH (310 million Euros) at a time when classic credit has only grown by 14% to 3 billion DH (282 million Euros). This good performance of car credit is no illusion: the future of finance houses will be increasingly dependent on this sector, rather than on personal loans, which the operators are finding it difficult to bring back into line because of the continuing fierce competition from banks. In the same way, car credits which have increased by 20% to 21.9 billion DH (2 billion Euros) are in the process of overtaking personal loans which have seen a decrease of 1% to 23 billion DH (2.1 billion Euros).
The other formula for acquiring cars which has the wind in its sails is undoubtedly long term rental. This formula, which offers made to measure solutions for managing company fleets, is doing well. Growth which is explained by the development of innovative solutions aimed at fleet managers and drivers, in addition to the expertise of the company and its relevant offering. Several companies share this market among them. This solution, used by multinationals based in Morocco and then extending to national companies, has attracted certain administrations including, in particular, agencies and offices. Ministries and local administrations, whose fleets are estimated to amount to 50,000 vehicles, have surfed this wave.
Following the public sector, SME’s represent a market with high potential. These SME’s typically represent 2 to 10 vehicles per company. But volume will be constituted by this niche over the years to come because the large companies already use this solution. Outside of SME’s, the rental of premium cars is another growth channel identified by the rental operators | 21/12/2016 | Mohamed Chaoui