How to Acquire Fleet Vehicles in Latin America
Financing and leasing vehicles can be done in many ways, but how does it work in Latin America? What is the best way to acquire your vehicles and where do you get them from?
First, you could acquire your vehicle through a direct purchase from the automaker of your choice, and this could be done with or without financing. Among the top-selling brands in Latin America are Chevrolet, Volkswagen, Fiat, Jeep, Toyota and Nissan.
Toyota Hilux 2021, the best-selling vehicle in Latin America in 2021 (copyright: Toyota)
Since interest rates in some Latin American countries like Argentina are quite high, paying up front could be a viable option if you don’t have other investment alternatives that effectively counter the cost. funding.
Be sure to ask for a 10-20% discount for initial direct payments. However, it might be a bit more difficult due to the lack of supply coupled with robust demand seen in the market today.
For financed vehicles, the benchmark interest rates going forward in 2022 in the largest automotive markets are Brazil (9.25%), Mexico (5.5%), Argentina (40%), Colombia (3%), Chile (4%) and Peru (6%). Expect a few extra percentage points to be added to contracts to allow for bank margins.
Besides the largest banks in the region such as Itaú Unibanco and Banco Santander (Brazil), Bancomer (Mexico) and Grupo Aval Acciones y Valores (Colombia), some of the major OEM financiers in the region are Volkswagen Financial Services, GM Financial (mainly Chevrolet), Toyota Financial Services, RCI Financial Services (Renault-Nissan) and Stellantis Financial Services (mainly Fiat).
Keep in mind that you will need to calculate 10-15% depreciation after the first year of ownership for direct purchases, depending on vehicle make and model and other economic impacts. In 2022, however, the depreciation is expected to be less, due to supply chain issues and high inflation.
Another vehicle acquisition option, which has been growing for some time in Latin America, is to obtain your vehicles through a multi-year lease agreement with a vehicle leasing company, most of which today also offer management services. of fleet.
Not only does outsourcing management services free up your time to focus on your core business, there’s usually no need to deal with vehicle maintenance, insurance and taxes. Ultimately, you can achieve significant savings if you find the right partner, i.e. a leasing company that has multi-regional leverage as well as local expertise.
In terms of rental type, fixed-term contracts, more common in Europe, are generally more popular in South America, while open-ended contracts, influenced by the United States, are more common in Mexico.
While open-ended leases could give purchasing experts more peace of mind as they don’t have to deal with the risk of vehicle depreciation, open-ended leases have more flexible terms, a more attractive alternative for some people.
Main players in leasing
In January 2021, a total of 1.42 million corporate vehicle lease contracts were identified by Fleet LatAm in Latin America, up 47% year-over-year. The figure for 2022 has not yet been calculated.
When it comes to the biggest players in Brazil, local companies Unidas, Localiza, and Movida hold the largest long-term fleet rental market shares in the country. The companies also offer car rentals. The French long-term rental multinationals ALD Automotive and Arval follow.
In Mexico, multinationals Element Fleet Management and LeasePlan, as well as local companies Casanova Renting, Ariza and TIP Mexico have some of the largest fleets, and in Argentina RDA Renting leads, followed by Auto Corp.
Meanwhile, Mitta, Tattersall Europcar and Salfa Rent are holding out in Chile, Renting Colombia, Traxall and ALD Automotive (Colombia), and Arval, ALD Automotive and Mareauto (Peru).
Finally, while the American company Wheels Inc. is a major player in the United States supplying vehicles to Puerto Rico, the Guatemalan company Arrend Leasing covers various countries in Central America.
As for alliances, there are two in the region. One is the ALD Automotive-Wheels alliance which also collaborates with Auto Corp and Arrend Leasing, and the other is the Element-Arval alliance which has partnered with RDA Renting.
Recall that Localiza is in the process of acquiring Unidas and ALD Automotive is in the process of acquiring LeasePlan, two transitions that could change the name of the game somewhat in Latin America. Let’s see what will happen in the months and years to come.
To learn more about what’s happening in Latin America, register now for the next session of the Fleet LatAm Business Networking Group on January 25. The topic of the day will be the evolution of the TCO.