While South Africa’s economic climate has seen business confidence wane, opting to sweat existing assets – especially when it comes to transport and logistics – may not be in a company’s best interests, says John Loxton, General Manager of WesBank’s Fleet Management and Leasing Division
Transport is a vital cog for many businesses. Whether it’s a fleet of five delivery vehicles, hundreds of company cars or an entire transport division, keeping the wheels of commerce turning remains paramount.
However, since economic forecasts for South Africa give rise to expectations of a further weakening in GDP growth, rising interest rates and a frailer exchange rate, many businesses are hesitant to invest in replacement vehicles, instead opting to prolong the life of their existing fleets.
Yet, this is a short-term solution, according to John Loxton, General Manager of WesBank’s Fleet Management and Leasing Division. He says that keeping cars, vans and trucks on the road beyond their sell-by dates comes at the expense of optimum resale values and increased downtime for repair and maintenance.
Loxton says a financially savvy approach would be to invest in full maintenance leasing, also known as FML. The model is structured to optimise cash flow and allows businesses far more flexibility for up- or down-scaling.
“FML solutions have evolved and are now completely flexible and transparent. In our experience this allows customers to structure leases that suit their business requirements. Further value is added through managing clients individually, monitoring their fleets and then providing valuable feedback that allows them to restructure contracts based on usage trends,” he says.
According to Loxton, taking the FML route affords fleet and finance managers the opportunity to proactively reduce transport-related costs at a fixed rate. He maintains that, as a financial decision, the concept makes perfect sense.
“It provides fleet operators with the lowest cost of acquisition. Businesses also benefit from our expertise and industry partnerships, which deliver exceptional operational efficiencies. The aim is to deliver FML solutions that reduce transport costs,” he says.
Another advantage, says Loxton, is that in cases where businesses face difficult trading conditions or need to free up cash flow, leases can be cancelled at any time. “This is in stark contrast to financed assets where small businesses could be required to settle outstanding loans, most likely incurring substantial losses.
“Of course, the leasing route isn’t a one-size-fits-all remedy. Businesses should use experts who are able to align to their values, provide the best advice and tailor a solution that perfectly meets their needs,” he advises.