HOW IT WORKS

It has been said, “If it appreciates, buy it; if it depreciates, rent it”.

You would never purchase a house if you knew for a fact that that within four years it would be worth less than half its original value – but South Africans do that with vehicles every single day.
If you are the type of person who acquires a vehicle with the intention of keeping it for over six years then by all means you should finance it with a fully amortizing loan or even pay cash.

However, if you would like to drive a new vehicle more often take time to review some of the most common objections we hear with respect to renting.

Objection: ''I Want To Own My Own Vehicle''

With ownership comes all the associated market risks:

  • Depreciation – new vehicles depreciate over 20% in the first year
  • Changes in market preferences – if you own your vehicle and the market turns is back on the model you own, you’re stuck with a vehicle you can’t sell when you want to.
  • Used vehicle seller – when you decide it’s time to change your vehicle, you need to dispose of your asset. This is either done through private sale with all the risks associated with it, or you can trade your vehicle in at a dealer where you will negotiate the trade in value with someone who takes trades several times each day… who do you think will come out on the winning side of that negotiation?

 

Renting your vehicle shifts the market risks to the rental company. You only pay for the depreciation during your rental term. With renting you have no obligation to purchase the vehicle at the end of the rental term, so if the market no longer favours your vehicle model that’s not your worry. You must simply return the vehicle to the rental company at the agreed upon time, in the agreed upon condition and your obligation is over.

Objection: ''I Will Always Have a Vehicle Payment If I Rent''

Most people don’t want to finance a car for 60 months with a balloon payment, but do so only to afford a payment that fits their budget. If they could afford a monthly installment over a shorter period most people would do that because they want to enjoy the latest vehicle model on the market.The majority of vehicle loans never run their full term because people get bored of the vehicle they are driving and want to trade it in. For those few who do reach the end of their finance contract, their vehicle is now old, out of warranty and maintenance plans and they’re eager to trade the vehicle in on a new one. As a result, most South Africans never experience payment-free vehicle ownership. If you’re always going to have a vehicle payment, why not have it where you take all the risks out of vehicle ownership – vehicle rental is your solution.

Objection: ''I Will Be Limited To Kilometers Traveled or Hidden Damage Clauses''

A vehicle’s future value is negatively impacted by excess kilometers, excessive physical damage or poor maintenance. If you own your vehicle and are making loan payments on it, excessive use / abuse will depreciate your vehicle faster than the norm and you will “pay” for it when it comes time to trade it in. When renting a vehicle, you structure your term and kilometers up front so your payment reflects the type of usage you will incur over the term. If you exceed the kilometers, don’t maintain the vehicle or cause excessive damage to the vehicle, you will be held responsible for it – just as if it were your own vehicle.

Executive Mobility Financial Solutions works with you to:

  • Ensure your monthly kilometer allowance matches your driving needs.
  • If during your rental term, you see you are exceeding the contracted amount, we’ll adjust the remaining rental payment to cover the excess usage.
  • Each EMFS rental vehicle is covered by maintenance and warranty for the full rental term. (On new vehicles only)
  • EMFS has drawn up clear excess wear and tear guidelines which are provided to you at the start of the rental in order to prevent unexpected surprises.
  • The Rentee can purchase an additional rental benefit which will allow the annual repair of minor cosmetic damage to the vehicle.

Objection: ''I Won't Be Able To Get Out Of the Rental Agreement''

The EMFS vehicle rental agreement has a clear Early Termination clause. This clause details the amounts required to be paid by the Rentee to EMFS in order to prematurely terminate the agreement. When you compare Early Termination of our rental agreement to early payout of a traditionally financed loan agreement you should consider the following:

  • All that is required is your first months rental, a refundable security deposit and acquisition fee.
  • If you finance a new vehicle on a conventional loan with no down payment and wish to terminate it prematurely, you’ll also have amounts which will need to be covered as the loan amortization likely has not kept up with the vehicles market value.

Costs such as:

  • Lost market value (the greatest impact)
  • 90 days loan interest

In both instances (rental and loan), you are able to exit the agreements prematurely, however you’re likely to incur costs in each.

Objection: ''Why Am I Responsible For Maintaining a Vehicle I Don't Own?''

Just like in vehicle ownership maintaining the vehicle is critical to maintaining the vehicles future value. The operator of the vehicle is in the best position to ensure the vehicle has both regular maintenance as well as addressing periodic mechanical issues.EMFS has taken most of the aggravation out of maintaining the vehicle as each new vehicle rental includes:

  • EMFS Comprehensive vehicle coverage in the event of accidents (Rentee is responsible for payment of a Damage and Loss Liability Waiver)
  • Full maintenance and warranty for the full rental term (On new vehicles only)

While it’s important for each individual to examine their vehicle needs and determine the best option on how to acquire the vehicle, the option of renting should be a key consideration for most South African consumers.

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