Prashanth Bisnath | National Head | Sales: Fleet Management & Leasing | WesBank | mail me |
In fleet management, determining the optimal vehicle replacement cycle is critical for operational efficiency, safety and costs. A poor decision impacts maintenance costs and cash flow. Advancements in telematics and leasing models are shifting practices.
Fleet managers are reevaluating traditional practices to remain competitive and responsive to market demands. A balanced replacement strategy considers both the rising costs of older vehicles and the financial implications of new ones.
Prolonging high-mileage vehicle use increases maintenance costs and the risk of downtime, disrupting operations and profitability. Replacing vehicles too soon can lead to unnecessary capital expenditures.
Telematics enabling usage-based leasing
Telematics has revolutionised fleet management by offering real-time insights into vehicle performance and driver behaviour.
Predictive analytics in telematics systems help fleet managers pinpoint when operational costs outweigh a vehicle’s benefits. This data-driven approach optimises replacement cycles, improves cash flow, enhances safety and reduces maintenance costs.
By aligning schedules with performance data, companies minimize repair costs, preserve capital and ensure financial stability. Regularly updating fleets with newer models equipped with advanced safety features also reduces accident risks. Telematics-powered proactive maintenance helps identify potential issues early, lowering repair costs and extending vehicle lifespans.
Reducing risk and enhancing efficiency
Financial institutions play a crucial role in fleet management by absorbing risks associated with vehicle acquisition and depreciation.
Leasing and financing options allow businesses to maintain modern fleets without large upfront investments. These solutions enable companies to focus on core operations while financial institutions manage asset risks.
Leasing models, like full maintenance lease agreements, offer comprehensive solutions for procurement, maintenance and more. These solutions include vehicle procurement, maintenance plans, sale and leaseback options, disposal, insurance and roadside assistance.
Such offerings ensure predictable monthly costs and help businesses preserve cash flow and avoid unexpected expenses.
The global shift to usage-based fleet leasing
Around the world, vehicle ownership is shifting to usage-based leasing models. In the UK, 20-30% of new cars are leased instead of purchased, with over 1.6 million people opting for leasing. Low interest rates, favourable VAT policies, and a strong used car market contribute to the leasing trend.
The demand for connected and electric vehicles has made leasing an attractive option for businesses. Leasing provides access to the latest vehicle innovations without long-term financial commitments.
Africa is also seeing growth in leasing, particularly in Botswana and Namibia, with fleet volumes expanding by 42.4% in 2022.
In South Africa, the rental fleet size reached 64,200 units in November 2023, a 14.2% increase from the previous year. The Western Cape led transaction growth with a 22.5% year-on-year increase, while Gauteng recorded a 10.3% rise.
The future of fleet management and usage-based leasing
Despite global leasing trends, South Africa faces unique challenges in fully adopting the model. A deep-rooted preference for vehicle ownership remains a barrier, with businesses viewing it as a sign of stability.
Higher interest rates and an immature leasing infrastructure have slowed adoption in South Africa. However, the rising cost of ownership and demand for financial flexibility are driving interest in leasing.
For businesses seeking to optimise costs, usage-based leasing presents a compelling opportunity to enhance efficiency.
South Africa’s transition to usage-based leasing is still developing, but global trends suggest growth in this direction. Companies embracing leasing will benefit from enhanced safety, reduced financial risk and greater scalability.
The question for fleet managers is not whether to transition but how quickly they can adapt to these changes.
