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Solid reasons to grow - Doing Business | DOINGBUSINESS.RO

  |  09.11.2012

Solid reasons to grow

The operational leasing market in Romania, including also the fleet management services has room for improvement and growth

Grow

I estimate that this segment will surely continue to expand, as there is a large growth potential in Romania for operational leasing and fleet management services.

 

Local mentality change, in progress

 

After S1, there were 41,000 vehicles managed by the operational leasing companies, based on the ASLO (The Association of the Operational Leasing Companies (ASLO) statistics and if we consider the growth rhythms of the last couple of years, we would estimate a market increase in Romania of around 15 percent for the next year. 

 

There is still a slight reluctance from the local companies to switch to operational leasing, which is technically a long term rental of a vehicle, for a certain duration and mileage with associated vehicle services and where title of ownership does not pass to the client. This mentality change is in progress and we expect more and more fleet managers to become aware of the benefits provided by this form of vehicle financing.

 

Other aspects, which may characterize the local market landscape, refer to the legal environment concerning operational leasing, which requires modifications that can highlight the particularities of operational leasing compared to financial leasing. The market is still in progress of consolidation and we often notice the insufficient adaptation of the vehicle services suppliers to this type of product, where they should better adjust their working procedures and provide the quality service level that the clients expect. Nevertheless, as more and more companies and especially multinational ones demand the product, the market is steadily progressing and adapting to their needs.

 

Eyes at TCO

 

Considering the evolution so far, the focus for next year will be to build the further advance on the market with high quality operational leasing and customer care services, innovative solutions for vehicle mobility and driver’s communication, while ensuring our customers a satisfactory TCO (Total Cost of Ownership) for their car fleet. The defensive driving program, launched last year in partnership with Titi Aur, is a solution for optimizing TCO by improving the drivers’ behavior, while increasing their road safety.

 

Although the car market in Romania has seen a significant decline in new car registrations year on year since 2008, this has mainly been due to retail sales and consumer loans. The corporate sector itself has seen the opposite effect, where company cars are still required but the method of funding has seen a radical change.

 

Furthermore, the client portfolio is developing in a similar rhythm as last year while the renewal rate, which is a reference indicator in operational leasing that determines the ratio of renewed vehicle contracts from the amount of terminated contracts, has considerably increased. This year we’ve noticed so far an 86 percent renewal rate, which is 13 points higher than the one at end of 2011.

 

Last year in particular has seen a substantial rise in operational leasing as a form of funding. This is due to various reasons, primarily liquidity shortage and fleet cost optimization. For this year, these will remain the main triggers of market growth. Furthermore, local companies seem to be becoming more aware of the benefits of the operational leasing products, and international companies, accustomed to this type of vehicle financing, are mandating this solution more on the Romanian market. In 2012, we have noticed a positive evolution in the used car sale activity, even though the Romanian second hand car market volume has increased this year mainly due to imported vehicles. After Q3, there were roughly 1,200 ALD used vehicles sold online, via the ALD carmarket bidding website, which is comparable to the total amount sold online in 2011.

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