Cost savings of up to 20% for companies
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Astra Self Drive Cars Plc (ACR), the CSE-listed car hire company, has introduced the Operating Leasing concept, targeting local corporations looking to cut costs and streamline operations, while outsourcing their car fleet.
Vassilis Kontos, Marketing and Sales Manager at Astra Leasing told the Financial Mirror that Operating Leasing is different to Financial Leasing, which many people confuse with. Financial leasing is identified with a fixed amount toward the usage and the final acquisition of the asset (in this case the vehicle), while Operating Leasing has only a fixed monthly amount for the use of the vehicle.
The main difference between the two is that in the case of the financial product, the client may offer another lump sum at the end of the lease and acquire the used vehicle, while in the case of the operating lease, the client is not left with a used car, but has the option to enter into a new lease agreement with new vehicles.
Other important differences lie in the field of the inclusions of each lease. Financial lease, as its name proclaims, is a banking facility, while operating lease is a service which includes insurance, fleet management, road support, replacement vehicles, maintenance and servicing, tyre replacement, accident handling as well as any other costs associated with a vehicle, except fuel.
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Hassle-free
The energetic Marketing and Sales Manager at Astra Leasing said that companies often fail to recognize the cost of time wasted on non-core matters such as acquiring, maintaining, administering and finally getting rid of a vehicle.
“One way to boost staff productivity is to allow staff to concentrate on their main activity by offering them new, safe, fuel-efficient vehicles, and changing them with new ones quickly without affecting your cash flow.”
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Financial Engineering
Kontos said there are many more advantages, particularly ideal for listed and international companies.
The operating lease scheme allows companies to be more flexible with their fleet as they not have to buy and sell cars according to the projects they undertake or how their business is growing. In addition, as the leasing company is the owner of the vehicle there is no balance sheet impact for the customer and as a result measures such as ROE and ROCE are optimised. This has particular appeal to organizations where performance, investment and remuneration are based on and driven by profitability ratios. The P&L line is also improved as the fixed and budgeted monthly cost is lower than the cost of financing a vehicle and paying for all the associated variable costs that go with it, such as insurance, tyres, maintenance, repairs, etc.
Operating leasing can be attractive for a number of reasons, Kontos pointed out. “A customer can always drive a new car, not worry about any hidden or unforeseen costs, while reducing their expense and improving their cash flow!”
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Cost Advantage
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Astra Leasing has a diverse client base, as Kontos explained, ranging from banking institutions to courier and pharmaceutical companies, as well as an increasing number of small and medium-sized companies that have recently discovered the benefits of this service.
As regards the level of saving for corporations opting for the Astra Leasing services, Kontos said out that the monthly rate depends on the type of car, the lease duration as well as the level of insurance and gave the following example:
For a European 1.6-litre saloon with all the extras a corporate customer requires, for a 3-year lease and with maximum insurance, the monthly rate would be around CYP 260 plus VAT, while for a similar 1.4 saloon this might drop to CYP190 plus VAT.Â
If the company decided to buy and finance the 1.6 saloon, the expenses would be as follows:
- Cost of a typical European 1.6 saloon on-the-road CYP10,500
- Cost of investment @ 4% annually over three years CYP 1260
- Road tax over three years CYP 165
- 3rd Party and Full Comprehensive insurance over three years CYP 1200
- Routine maintenance and oil change over three years CYP 900
Tyre - Non-insured wear and tear over three years CYP 300
- Administrative time lost (mechanics, car immobilised, etc) CYP 360
- Residual value estimation CYP 3500
Total cost amounts to CYP 11,435 for 36 months use, making it a monthly cost of about CYP 318 CYP.
Kontos added that for large fleets of over 50 vehicles the advantages are even higher with even more room for cost cutting.
“Companies in
Referring to the effect on the results of the CSE-listed company, Kontos said the positive effect this diversification is having from their tourist operations, as well as the improvement of their financial performance, will be even greater in the near future.
Astra has a market cap of EUR 4.5 mln and is listed in the Alternative Sector of the Cyprus Stock Exchange.
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