Why buy a car when you can rent or lease?
• Consumers should be aware of the alternative options available to them, writes Lynette Dicey
The Covid-19 pandemic continues to have far-reaching implications on almost every aspect of life as we know it. According to a recent American study, it is shaping our relationship with money in profound, and perhaps even lasting, ways.
A survey by Thriving Wallet and Discover found that the pandemic is not just altering how we spend money but is leading to a shift in how we think about money.
One of these shifts is a move from ownership to usership, with the preference for leasing and renting over buying gaining momentum globally. This trend applies to numerous big ticket items including vehicle ownership, with consumers increasingly finding themselves at a crossroad as they debate whether to buy, lease or rent a vehicle.
Contrary to popular belief, there is a distinction between renting and leasing. According to Ramasela Ganda, CEO at Avis Budget, renting removes any risks associated with vehicle ownership, requires no maintenance or disposal and customers can walk away from the vehicle whenever the need arises.
While leasing also enables the customer to do away with the risks associated with ownership, the market depreciation associated with a vehicle can be spread over years, reducing monthly car usage costs.
SPENDING HABITS
This trend has been exacerbated by the pandemic and a volatile and unstable economic environment, which has reiterated the need for consumers to practice mindful spending habits.
Covid-19 has also served to accelerate the move towards low-touch purchasing of mobility services for consumers. Consumers can now decide to conduct either the entire process online or parts of it offline, given their level of comfort or interest.
This extends to how consumers schedule test drives, apply for credit and appraise their trade-in or even how their preferred new vehicle gets delivered to them. The one nonnegotiable throughout is the consistency of experience.
While flexibility and convenience are at the top of the list in terms of consumer needs, affordable instalments, access to newer models more often, as well as less stringent contracts seem appealing when it comes to mobility solutions, maintains Ganda.
“A car is a depreciating purchase that comes with high maintenance costs. As a result,
Mobility as a Service (MaaS) is gradually gaining traction among those who want minimal”spend vehicles, towards
she says. Research conducted by KPMG through their Mobility 2030 study indicates most cars sit idle for 95% of each day.
“This is an incredibly inefficient utilisation of one of the most expensive expenditures in the average South African household given that vehicle ownership cost is 37% of an average household income,” Ganda points out.
MaaS allows users to subscribe to mobility services, enabling them to select a vehicle of their choice based on their specific needs at a particular time. Consumers have the flexibility to choose the most appropriate vehicle based on their immediate priorities, preferences and affordability. On-demand mobility represents the first wave of MaaS, maintains Ganda.
“Through MaaS, users can access a variety of transportation modes to perfectly suit their needs. As these models mature, travellers would not even need to consciously choose the combination of modes of transportation; their preferences — derived from the time of day, weather, traffic patterns, their location as well as their mood — can be modelled by MaaS and activated during the course of the commute. There is no hassle of maintenance, selling the car or concerns around residual value. This is the first step towards a full MaaS offering.”
For many millennials, in particular, owning and maintaining cars has become an expensive exercise for a generation that tends to place a higher priority on experiences rather than ownership. “This is a generation not necessarily interested in long-term binding purchases,” says Ganda.
Internationally, there is a well-established trend to rent for a specific period as the allure of ownership declines and people concern themselves with efficiency and cost reduction. This continues to see ride sharing options attracting attention from the consumer. Current options for these consumers will improve and, in the longer term, the autonomous electric vehicle will remove the need to own a vehicle.
“With this shift, leasing or renting becomes an appealing option, offering flexibility to those who can choose whether to keep the vehicle at the end of their contract period or initiate a new contract for a new vehicle.”
EXPERIENCE TAKES PRECEDENCE
The automobile industry has seen a consistent shift in consumer sentiment and needs in recent years. With this paradigm shift, says Ganda, it’s clear experience continues to become a critical differentiator.
“In the past, conventional finance offerings met the needs of individuals who were seeking access to an ownership-based mobility service. There has long been only limited options when it comes to long-term, hassle-free access to mobility services with the result that customers have had to trade convenience for cost. The introduction of a service which severs the link between driving and maintaining a vehicle, as well as purchasing and driving, is groundbreaking. MaaS is based on the premise of leasing over ownership,” says Ganda.
Rather than relying solely on conventional solutions, Ganda says consumers need to understand the alternative options available as far as their mobility needs are concerned.
“Weigh the pros and cons of either leasing or renting, as well as buying a car, to make an informed decision,” she urges, adding that Avis offers a wide variety of vehicles to choose from coupled with numerous specialised car hire options.
MAAS ALLOWS USERS TO SUBSCRIBE TO MOBILITY SERVICES, ENABLING THEM TO SELECT A VEHICLE BASED ON THEIR SPECIFIC NEEDS