New Zealand’s vehicle finance and leasing market is highly competitive, and to the uninitiated, rather overwhelming. But the advantages are there for those prepared to do their homework and listen to the experts.
 

A good place to begin any market review is to take a look at the big picture trends, and through the eyes of some industry stalwarts.

For Joe Bond, manager financial services at Honda New Zealand, there have been two significant developments in recent times. 

The first is the shift in consumer demand from sedans to SUVs. This is now being reflected in company fleets, and it’s helped by the fact that manufacturers are delivering fuel economy and running costs on SUVs similar to sedans and hatches.

Bond says it’s important to consider what’s currently popular both in the new and used vehicle markets – like SUVs. “Supply and demand basically determine residual values, or resale value. This is then reflected in the lease repayments. Less depreciation equals lower monthly costs. So picking a good car can save huge amounts over the term of a lease.” 

Make sure you align yourself with a financial services provider that passes these savings on to you as a client, he adds. And ensure your lease covers what you want it too. 

Secondly, Bond says the industry, “in its race to the bottom”, has tried to make lease repayments as low as possible. “This has caused many company buyers to pay more attention to what a lease will and will not cover.”

His advice is to be careful when obtaining a quote and always compare ‘apples with apples’.

Andrew Collett, dealer principal at Davie Motors Holden, is not sure if there’s been any movement in market share from leasing to finance and vice versa. “With the increased volume in the new vehicle market, all lenders appear to be happy with their share of the business on offer,” he says.

However, Collett has noticed more businesses doing the sums to compare lease versus finance. Trying to determine the TCO with so many low rate finance packages out there can be a challenge for business purchasers, he believes. “Throw into the mix free servicing that Holden now offers versus charged servicing or subsidised servicing from our competitors and trying to work out the actual cost to run a vehicle can be tricky.”

Holden New Zealand now offers three-year/100,000 kilometre free scheduled servicing (whichever comes first) – including the Colorado ute. Roadside assist is also included in the deal.

“This makes working out the TCO very easy. The guesswork around servicing is taken care of,” says Collett. “This means when comparing lease to finance you can work out what you are actually paying for very quickly.”

From the perspective of a fleet management and corporate fleet leasing expert, Geoff Tipene, managing director of SG Fleet NZ is seeing a continuation of the move away from ownership to off-balance sheet funding and fleet management.

“Companies are looking for a fleet management partner who can take full control of a company’s fleet along with the well-being and productivity of their drivers,” he says. 

“Capturing data and reporting on vehicle utilisation by cost centre, business unit or total fleet is a big part of reducing costs in a fleet.”

Packages and innovations

Variety and innovation are two words that sum up New Zealand’s vehicle funding market. 

Bond says while the options may at first seem overwhelming or complicated, they are excellent when applied effectively.

“Challenge your lease or financial services provider to review your company’s spending for mobility (vehicles) and make them give you an indication of ways to reduce costs.”

A recent add-on in the Honda camp has been GPS tracking, with all costs bundled into the lease repayments. Bond says their easy-to-install system saves customers the costs of hard-wiring GPS in, then out, of cars. 

“It has also meant that we have started helping them with utilisation rates. Moving them to the optimal number of cars for the business.”

Over at Holden, Collett reports that Smart Buy, a finance package with guaranteed values at the end of the term, is becoming increasingly popular.

“This product is fantastic for employees with a vehicle allowance. With free servicing, now the only certain costs the owner needs to take care of is insurance, annual registrations and tyres.”

Collett says Smart Buy especially suits SMEs – offering the comfort of a lease with residual protection, but also allowing customers to take advantage of residual gains.

Own vs lease

Residual value pricing has definitely impacted the ‘own vs lease’ decision. Residual values on utes in particular have been very strong, says Collett. “Buyers have certainly cottoned on to this as this is the area we get asked the most about lease vs buy. Buyers want to do the sums themselves and are increasingly OK with taking some risk.” 

Bond says while ownership will always have its place, he’s delighted to see many up and coming SMEs keen on the advantages that lease offers – “not investing too much capital in something like a car”.

“Ultimately things like the fixed monthly repayments that include the maintenance for the car are very empowering for businesses.”

Looking ahead, the introduction of the new IFRS16 leasing accounting standard in January 2019 is expected to herald interesting times for the fleet industry.

“For lease providers it means really large shifts in the way we document business day to day,” explains Bond. “For the companies leasing it simply means needing to report a few more parameters compared with when the cars were off their balance sheet.” 

Does he predict less people leasing? 

“I don’t think so. The main reasons people lease, I still feel, is related to the contingent liability/residual value risk.”