Johannesburg - Vehicle private leasing specialist Ariva has made slower progress than it anticipated in getting consumers to buy into the concept of renting vehicles.
However, it still expects to have about 8 000 vehicles on its books within the next five years to fully use the R1 billion funding it secured for the venture.
David Smith, the managing director of Ariva, said it now had about 1 000 vehicles on the road, which was less than the estimated 1 500 it had expected to have by now.
Smith said R1bn in funding was equivalent to having 8 000 cars on the road. “There is no reason we can’t get there in the next five years.”
Ariva is a long-term joint venture launched in January last year between listed transport and mobility group Imperial Holdings and furniture retailer JD Group.
Smith said the slower-than-anticipated take-up of vehicle rentals had allowed Ariva to build a robust back office to manage vehicle insurance, service to clients, reconditioning and repossessions.
Ariva had also increased the number of signed-up vehicle dealerships to 235 and expanded the concept in the past 12 months to include all vehicle brands and not only those managed by Imperial and its motor retailing subsidiary, Associated Motor Holdings.
Smith said 98 percent of Ariva’s clients were using the facility because their vehicle finance applications had been declined by banks. He said Ariva’s model was an alternative to the instalment sale agreements offered by banks.
Smith said Ariva needed to get into the mainstream by educating consumers about the benefits of vehicle private leasing or rentals, which together with other marketing channels, such as “word of mouth” and the internet, would have a cumulative effect on the number of deals it secured.
Ariva aims to provide an affordable motoring solution to consumers through a fixed monthly rental that includes a full warranty, service plan, comprehensive insurance, roadside assistance, accident management and vehicle tracking subscription.
Smith said it was “bizarre” that consumers rented houses, which were an appreciating asset, but bought cars, which were a depreciating asset.
He said the vehicle finance applications of about 35 percent of people who went into a dealership to buy a car were rejected by banks.
Ariva was unable to finance deals for all these people but could possibly assist between 15 percent and 25 percent of them, he said.
Smith believed the concept would gain traction in the market because of its fixed-interest rate option, which influenced affordability, and not because it was cheaper than instalment sale agreements.
Smith said Ariva initially believed that the most interest would be from people looking at bottom-of-the-range vehicles with an average monthly rental of about R2 800. But mid-range vehicles with an average monthly rental of about R3 800 had been the most popular.
When Ariva launched, the cost of vehicles it offered ranged in price from R70 000 to a maximum of R150 000, but the maximum has subsequently been increased to R250 000.
The average price of cars in its deals was between R160 000 and R170 000, which was higher than it had expected.
He said the Ariva model was not skewed to any particular vehicle brand or specification but to what customers wanted.
Hyundai models accounted for about 30 percent of Ariva’s book, which mirrored what was happening on the dealer floor, he said. - Business Report