8 Jan 17

The Leasing and OEM biangle

The traditional funding method in Thailand is purchase, as local companies like to own assets. Some have adopted the lease option, however, as it does not require a large budget and it will not show on the books.

By contrast with many more mature markets, the process of communicating with the OEMs is a matter between the lease provider and the OEMs. Despite this rather unusual situation whereby there is no direct contact made with the OEM by the final customer, discounts are available although they may be limited to 3-5% of list price.

Where leasing does exist, it is available with the same options as in mature markets. One of the major suppliers, Thai Orix Leasing, for example, offers operating lease and financial lease, with or without maintenance. With operating lease, the rental rates are treated as operating expenses in the income statement and, therefore, the leased vehicles do not affect the balance sheet. With financial lease, the leased cars are recognized as an asset and payable as a liability on the balance sheet.

Cars in Thailand are usually given to sales personnel who need them to visit customers and suppliers (tool of trade cars). Higher-level positions - senior management, directors, department heads, may be given cars as part of their benefits as well.

Authored by: Tim Harrup