Firms turn to leasing to cut on insurance, care costs

Organisations are increasingly opting to vehicle leasing over purchases to cut down on maintenance and insurance costs, according to motor industry players.

CFAO Group vehicle leasing arm Loxea predicts that the trend will gather momentum as the business landscape evolves.

Loxea managing director Jennifer Kinyoe told the Star that the leasing market is expected to show substantial expansion in the fourth quarter of 2024 due to increased demand from businesses seeking cost-effective fleet management solutions, alongside a demand for fleet management solutions.

Driven by increasing cost of acquiring new vehicles, businesses, organisations and government are turning to leasing as a means of cutting down on capital expenditure.

Vehicles leased through private providers come with comprehensive service packages, ensuring minimal downtime and predictable costs for repairs and maintenance.

“Kenya’s vehicle leasing market is maturing, and Loxea has positioned itself at the forefront of this evolution,” Kinyoe added.

The government has gone big on leasing in the past few years, with the National Treasury last year (2023) allocating Sh3 billion to pay pending bills owed to the leasing companies. 

The National Police Service is one of the state agencies that have embraced the model, with Kenya Power also announcing plans for the same.

The venture has seen the government enter into a deal with local financial institutions to provide the funding. 

CFAOs diversification into leasing comes at a time that latest industry data shows New vehicle sales fell to 859 units in July 2024, compared to 901 units in June this year.

Kenya Motor Industry Association (KMIA) data shows the 11 players in the Kenyan market had sold a total 5,993 units in the Kenyan market in the seven months to July.

 “As we enter Q4 2024, we are excited about the opportunities to diversify our offerings. The dynamic nature of the vehicle leasing segment allows us to explore new products that cater to evolving client needs,” added Kinyoe.

New car sales in the country are mainly driven by the agricultural sector, construction, retail and transport sectors.

For instance last month, there was a sizeable sale in new trucks where a total of 328 units were taken, amid somewhat sustained activities in the key sectors.

This was followed by pick-ups (both single and double cabins) where 220 units were bought while small, medium and large buses’ sales were 60 units, 48 units and 22 units, respectively, amid continued investments in the public transport sector.

During the month, Isuzu remained the top dealer accounting for up to 50 per cent of total sales with 430 units, with seven months sales closing at 2,784 units.

It was followed by CFAO with 290 units or 33.7 per cent of total industry sales during the month (2,071 year to July) while Simba Corp came a distant third with an eight per cent share after selling 69 units during the month, and a total of 591 units in seven months.