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What is renting and why this business grows strong in Argentina

What is renting and why this business grows strong in Argentina
The rental of vehicle fleets raffles the crisis and even boasts of growing strongly. Who are the players that make up the local market
Por iProUP
02.09.2019 10.58hs Innovación

In every crisis there is an opportunity. Although Argentina is going through its second year with a drop in activity, that the economy shows a bleak picture and that consumption has collapsed, there are sectors that have been dodging the crisis and others that even boast that they are growing strongly, as is the case of renting.This is the rental of vehicle fleets, a service by which companies pay a fixed monthly fee and forget about all kinds of issues related to cars under their belt: from purchase, patent payments, insurance and even of maintenance

The actors in this market indicate to iProUP the factors that explain the reason for the growth of operations, all of them derived from the delicate economic situation:

- The exorbitant interest rates, which hinder the investment of companies in the vehicles that they need for the development of their activities

- The high opportunity cost of immobilizing capital in times of high uncertainty such as the current one

- Inflation and rise in the dollar, which raise the prices of road vehicles, which renting companies access paying much less for being their purchases in scale.

In recent years, companies in the sector grew in number of cars and customers. Even, alliances with international firms have been agreed and important players from the automotive industry, dealers and factories have even joined this business segment.Because of the crisis, more growth

Arturo Simone, general manager of RDA Renting, explains to iProUP why this service grows in times of economic crisis.

"It is a modality that helps in situations like those of today, since companies are forced to reduce costs. This service gives them flexibility to adapt. In fact, they can even return vehicles early in case they need to reduce the staff, as this is stipulated in the contracts, "he says.RDA is today one of the market leaders. It started operating in 2013 with 200 cars and today has nothing less than 10,000. To the point that the estimated turnover for this year is around $ 1 billion.

He works with all kinds of companies, from Monsanto to Danone. It maintains a global alliance with Element-Arval Global Alliance, a world leader in fleet management, with more than 3 million vehicles in 50 countries.

"In Argentina, renting is not deeply rooted due to ignorance and a cultural factor: there are companies that want to own the vehicles and that leads them to immobilize large sums of money and make bad investment decisions," the executive warns.

AutoCorp is one of the pioneers in Argentina. It started in 2004 with 350 cars and today owns more than 2,000. Its CEO, Alberto Vélez, has been observing a strong acceleration of demand, as revealed to iProUP.

"The market begins to expand when customers perceive that with this modality they lower their costs. Maintaining a fleet requires specialized personnel, as in Brazil, which even has fleet management careers," says Vélez.

In 2016, AutoCorp, with Argentine capitals, became an exclusive partner for Argentina of the ALD Automotive World Alliance, a global company present in more than 50 countries, with 1.8 million vehicles. That same year, it expanded to Uruguay to provide regional coverage to multinationals.For Vélez, one of the reasons that explains the expansion is the use of technology, which allows to take care of the safety of employees and lower the expenses of the companies.

"Customers are increasingly asking us for more information about the driver. With telemetry and scoring it is possible to trace his profile: if it is very risky, we train it with courses or talks. A fleet with many accidents increases costs. Finally, you end up taking care of safety of people and it is cheaper to renew the policy, "he completes.

Another one that registered strong growth is Metis, founded 15 years ago. "The situation in the country warrants that, having a persistent increase in vehicle values, the capital you need is increasing," Gabriel Sagarribay, commercial manager, tells iProUP.

The company works with Arcos Dorados and Lacoste. In the last year he added a new business unit: personnel transport. Part of its expansion is due to the long-term rental of utilities, which lose their value in a short time due to intensive use on public roads.

Prices and contracts vary by company, although according to market data disclosed to iProUP they are located at the following reference values:

- Toyota Etios can have a fixed monthly fee of $ 39,000 plus VAT ($ 47,200)

- The Volkswagen Vento Comfortline reaches $ 78,000 plus VAT ($ 94,400)These values ​​include everything: from all risk insurance to patent and maintenance. The customer only pays the gasoline and the garage, which can also be included in the monthly fee.

- comparative price chart: renting vs. own fleet -

In AutoCorp and Metis, lease agreements have a maximum of two years. In RDA, however, a minimum of three.

In addition, there are other firms that want to enter this market by observing the vigor that the sector registers. Specifically, car rental companies for individuals that are now turning to provide corporate solutions.

One of them is Omega Car Rental, born in 2012 with 40 cars and today has 170. Rentals are agreed to six months and today 40% of customers are corporate.

"This grew more than ever because with the variation that prices had, companies when they have to renew the units, choose to rent," Leonardo Iglesias, CEO of the company, tells iProUP.New players

From the same automotive industry they begin to join renting. In February, Blackrock Renting, from the Belcastro Group, an importer and concessionaire with 40 years of history, was launched. Unlike the others, it does not have its own fleet, since it has a stock provided by the concessionaire of the same group.

"Crises are an opportunity and that motivated the launch. The public is approaching when they understand that to develop their business they do not need a large initial investment for vehicles," Christian Brunner, commercial manager of Blackrock, tells iProUP.

On the other hand, at the end of November 2018, Toyota launched Toyota MobilityServices, a system to rent any vehicle through an app. A similar case is Awto, launched in February, in association with Nissan. These companies of Carsharing will soon turn their functions towards renting.

In addition, thanks to technology, startups such as VoyEnAuto begin to emerge, which make it possible to choose the vehicle and the number of rental days. Launched this year, its managers expect a turnover of up to $ 10 million.

"The problem is not so much inflation but the cost of immobilizing capital. Imagine what you get just by putting the value of a car, about $ 750,000, in a fixed term," says Federico Parapar, spokesman for the company, iProUP, realizing the high opportunity cost.In VoyEnAuto, the rentals are up to one month, and although the users are private, it points to entrepreneurs who need the vehicle on weekends or seasonally during some time of the year.Why do companies use it?

The step by step to have a rental service is very simple. Any interested company contacts a leasing company and gives details about the use it will give to the units: whether it is for managers, business executives or for the transfer of merchandise.

The firm takes care of everything else: buy the vehicle, pay the patent, insurance, maintenance service and even the management of a lawyer before an accident. The price of the monthly fee varies according to the filmed and the duration of the contract. The benefits are:

- Agility: renting companies, by knowing more closely to automakers, can accelerate purchase procedures. They facilitate access to new vehicles without having to sink capital. For acquisitions in scale, they can make a car for half of what a dealership sells.

- Financial advantages: since it is a mobility service, it is possible to recover VAT and Profits. As cars are rented, they are not part of the company's assets and, consequently, do not pay taxes. It also allows you to plan the expenses that the use of cars will require and thus organize the budget.- Management of procedures: when taking charge of the costs, the companies of renting prevent that their clients allocate personnel to the management. The vehicles are not of the company, so capital and human resources are released that can be used for the main activity of the firm.

- Solutions in case of inconveniences: due to damage or accidents, they have 24-hour service and the provision of a substitute. At the end of the contract, the rental companies are responsible for the sale of the vehicle and associated procedures.

Despite the advantages that renting offers, in Argentina it is surpassed in operations and capital by financing via leasing. Both modalities have two main differences:

- Leasing allows the client to acquire the asset at the end of the lease

- The monthly rental payment on leasing does not include any of the services, such as maintenance

"Leasing has many more marketing channels than renting. It applies to all capital goods, not just cars," concludes Hernán Bernat, president of the Argentine Leasing Association (ALA).

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