17 Jan 22

How to acquire fleet vehicles in Latin America

Vehicle funding and leasing can be done in many ways but how does it work in Latin America? What is the best way to acquire your vehicles and who do you get them from?

First of all, you could acquire your vehicle through a direct purchase from the automaker of your choice, and this could be done with or without financing. Among the best-selling brands in Latin America are Chevrolet, Volkswagen, Fiat, Jeep, Toyota, and Nissan.

2021 Toyota Hilux, best selling vehicle in Latin America in 2021 (copyright: Toyota) 

Considering that the interest rates in some Latam countries like Argentina are quite high, paying up front could be a viable option if you do not have other investment alternatives that efficiently counter the cost of financing. 

Make sure to seek a discount of 10-20% for upfront direct payments. However, it may be a little more difficult owing to the lacks in supply coupled with robust demand seen in the market today.

For financed vehicles, the benchmark interest rates coming into 2022 in the largest vehicle markets are Brazil (9.25%), Mexico (5.5%), Argentina (40%), Colombia (3%), Chile (4%) and Peru (6%). Expect a few more percentage points to be added on top of these to allow for bank margins.

Besides the region’s largest banks such as Itaú Unibanco and Banco Santander (Brazil), Bancomer (Mexico), and Grupo Aval Acciones y Valores (Colombia), some of the main OEM financers in the region are Volkswagen Financial Services, GM Financial (mostly Chevrolet), Toyota Financial Services, RCI Financial Services (Renault-Nissan), and Stellantis Financial Services (mostly Fiat).

Keep in mind that you will need to calculate a depreciation of 10-15% after the first year of ownership for direct purchases, depending on the vehicle make and model and other economic impacts. In 2022, depreciation should be less though, owing to supply chain issues and high inflation. 

Another vehicle acquisition option, which has been on the rise in Latin America for some time now, is getting your vehicles through a multi-year rental contract with a vehicle leasing company of which most of them today also provide fleet management services. 

Not only does outsourcing management services free up your time to focus on your core business, there is usually no need to deal with maintenance, insurance, and vehicle tax burdens. In the end, you can achieve significant cost savings if you find the right partner, meaning a leasing company that has multi-regional leverage as well as local expertise. 

As for the type of leasing, closed-end agreements which are more common in Europe are generally more popular in South America while open-end leases – influenced by the United States - are more common in Mexico. 

While closed-end leases could give procurement experts more peace of mind as they do not need to deal with vehicle depreciation risk, open-end leases do have more flexible terms, a more attractive alternative to some. 

Main leasing players

In January 2021, a total of 1.42 million corporate vehicle leasing contracts were identified by Fleet LatAm in Latin America, up 47% year-over-year. The 2022 figure is yet to be calculated.

Regarding the largest players in Brazil, local companies Unidas, Localiza, and Movida hold the largest long-term fleet leasing market shares in the country. The companies also offer car rentals. France-based long-term leasing multinationals ALD Automotive and Arval follow. 

In Mexico, multinationals Element Fleet Management and LeasePlan, as well as local companies Casanova Renting, Ariza, and TIP Mexico boast some of the largest fleets, and in Argentina, leading is RDA Mobility followed by Auto Corp.

Meanwhile, Mitta, Tattersall Europcar and Salfa Rent hold strong in Chile, Renting Colombia, Traxall and ALD Automotive (Colombia), and Arval, ALD Automotive and Mareauto (Peru).

Finally, while US-based Wheels Inc. is a major player in the United States providing vehicles in Puerto Rico, Guatemala based Arrend Leasing covers various countries in Central America.

As for alliances, there are two in the region. One is the ALD Automotive-Wheels alliance which also collaborates with Auto Corp and Arrend Leasing, and the other is the Element-Arval alliance which has teamed up with RDA Mobility. 

Keep in mind that Localiza is in the process of acquiring Unidas and ALD Automotive is in the process of acquiring LeasePlan, two transitions which could change the name of the game to some extent in Latin America. Let’s see what happens in the months and years to come. 

For more insight on what is happening in Latin America, register now for the next Fleet LatAm Business Networking Group session on 25 January. The topic of the day will be TCO evolution. 

Authored by: Daniel Bland