Do car subscription services pay off in Brazil?
Acquiring vehicles from leasing and car rental companies via subscription car services is on the rise in Brazil, so much so that leasing companies are starting to absorb a considerable amount of dealership sales activity in the country.
In fact, the number of automaker direct sales to fleet represented 46% of the total direct sales market in Brazil in 2019, the largest percentage ever recorded in the country.
To determine whether or not making the transition to a subscription service is worth it, those seeking to acquire cars must first calculate total cost of ownership (TCO).
To calculate TCO, one first needs to calculate the initial cost of buying a vehicle and tack on interest if financing is involved.
Documentation also needs to be considered, meaning initial plates and licensing fees (paid to Detran) and annual IPVA taxes (paid to the state revenue department).
Other things to sum up in TCO are the cost of insurance, vehicle maintenance, and finally the eventual depreciation of your car.
To give you a better idea of the TCO calculated on three cars in the country, local news service G1 put together case studies on three vehicles. See graphs below (developed in February 2020)
In the studies, tax was calculated for the state of São Paulo, insurance was quoted by Minuto Seguros considering a resident in state capital São Paulo, maintenance was quoted by the OEMs, and depreciation was based on data from Agência AutoInforme.
24-month financing was calculated by Banco Bradesco, and when applicable, an annual benchmark interest rate yield of 4.25% was considered.
Renault Kwid Zen
|
| Paid in Full | 30% down | 0% down |
| Cost of the car | 40,390 | 45,852 | 48,194 |
| Cost of the property* | 12,790 | 10,247 | 9,157 |
| Car value after 2 years | 32,862 | 32,862 | 32,862 |
| Negative balance after 2 years | -20,318 | -23,237 | -24,489 |
| Cost of Subscription Service | ≥ 23,016 | ≥ 23,016 | ≥ 23,016 |
Chevrolet Joy 1.0
|
| Paid in Full | 30% down | 0% down |
| Cost of the car | 48,690 | 55,275 | 58,098 |
| Cost of the property* | 13,358 | 10,293 | 8,979 |
| Car value after 2 years | 41,300 | 41,300 | 41,300 |
| Negative balance after 2 years | -20,748 | -24,268 | -25,777 |
| Cost of Subscription Service | ≥ 26,136 | ≥ 26,136 | ≥ 26,136 |
Jeep Compass Longitude Flex
|
| Paid in Full | 30% down | 0% down |
| Cost of the car | 132,990 | 150,977 | 158,685 |
| Cost of the property* | 31,826 | 23,453 | 19,865 |
| Car value after 2 years | 109,887 | 109,877 | 109,877 |
| Negative balance after 2 years | -54,929 | -65,543 | -68,663 |
| Cost of Subscription Service | ≥ 63,336 | ≥ 63,336 | ≥ 63,336 |
*insurance, taxes, plates & licensing, other documentation, maintenance
As we can see, financing a car could set you back further than leasing a car but paying for your car in full wins the TCO race, according to the tables.
However, there are other benefits to car subscriptions that you must keep in mind. For one, if you lease your car instead of buying it, you can take the money you would have used to buy the car and invest it in other areas.
Moreover, consider down time. Car registration and other procedures, dealing with replacing your car when you have an accident, and advertising during vehicle remarketing are things you don’t really have to worry about with subscription services.
Corporate Fleet
For businesses, remember that you have less headaches and more flexibility when leasing, giving you more time to focus on your core business. However, before you decide, make sure to do your homework.
Calculate internal factors such as driver profiles and fleet usage plans as well as external factors such as the going interest rates and alternative investment opportunities.
To give you an idea of what is available in the country, here is a short list of some of the main car subscription providers in Brazil along with a brief description of their profiles. Keep in mind that pricing will likely vary for large corporate fleets.
| Company | Program | Network | Starting Price/Month | No. of Car Models | Monthly Kilometer Limit | Contract Periods |
| Localiza | Mensal Flex | 598 agencies 6 countries | 1,538 reais | 50 | 3,000; 4,000; | 30-365 days (cancel at any time) |
| Unidas | Livre | All capital cities, among others | 889 reais | 70+ | 1,000; 1,500; 2,000; 2,500; 3,000; 3,500; 4,000; 4,500; 5,000 | 12, 18, 24, 30, 36, or 42 months |
| Movida | Mensal Flex | 188 agencies in all states | 1,300 reais | 120+ | 1,000; 1,500; 2,000; 2,500; 3,000; 3,500; 4,000; 4,500; 5,000 | 30 -720 days (cancel at any time)
|
| Porto Seguro | Carro Facil | São Paulo state and greater Rio de Janeiro region | 999 reais | 30+ | 500; 1,000; 1,500; 2,000; 2,500 | 12 months 18 months 24 months |
Source: G1
