6 Sep 17

Financing and the future of fleets in Chile

The way vehicles are financed and fleets funded in Chile is set to change. The mindset is moving away from one of “ownership” to “user-ship” in which corporate fleet customers are happy to forego legal right to possession of the vehicle to keep capital in the bank and lines of credit open.

But with that mindset comes the belief that relinquishing ownership also means giving up control and this is proving the most stubborn to shift.
Cash, bank loans and finance leasing have all been popular methods for vehicle acquisition historically in Chile but now specialist fleet leasing companies like ALD, Arval Relsa and others have set up shop to drive this change and persuade fleet managers that owning vehicles is not a good investment for profits.
LCVs and Pickups most popular in Chile

In terms of cars, only 7% of those acquired in Chile are for corporate use. Commercial vehicles (LCVs and Pickups) account for over a quarter (25-26%) of all those imported.
Not only is FSL (full service leasing) provided by companies like ALD and Arval giving corporates an alternative to having capital tied up in vehicle ownership, they are also providing a means of cost-effectively managing the fleet. Depending on the service agreement, this could include maintenance, servicing, insurance, tyre management and a host of operational elements. These are paid for in a fixed monthly sum along with the rental cost, all of which is tax deductible. This type of renting scheme is also less risky for customers as the FSL provider assumes all inherent risks associated with vehicles use and depreciation.
With this agreement, the asset is owned by the funder, which could be the rental company or the bank that provides the loan. There is no option to purchase the vehicle at the end of the term but the agreement can include all operational services.
The availability for financing vehicles is well organised in Chile. Banco de Santander, which is the largest in the country, plus most other banks, offer finance leasing and vehicles loans.
Early days for fleet management in Chile

FM (fleet management) is not well-developed in the Andean nation. Short-term rental is popular (primarily because of tourism) due to an influx in recent years of franchisees of international rental brands like AVIS, Budget and other rent-a-car providers.
The concept of TCO (total cost of ownership) of vehicles is not well understood in Chile and is not something corporate customers consider when thinking about fleet funding. The fact that almost 30% of TCO is in the cost of fuel does not appear to have a bearing on the type of vehicle selected or that 10% of TCO is taken up in interest rates if vehicles are funded through bank loans and 25% accounts for depreciation.
Although FM is evolving slowly and concepts such as driver safety, driver behaviour (and its influence on overall fleet operation and cost), plus mobility are all new, as the country makes economic progress fleet services are becoming increasingly advanced – as are customers and drivers. The fleet management market in Chile will follow international trends. 

Authored by: Alison Pittaway