Why more South Africans are moving to ‘use’ cars rather than own them – and how much it costs
On Monday (16 July), Jaguar Land Rover introduced the option of a Guaranteed Future Value (GFV) finance product in South Africa.
The service enables customers to ‘trade-in’ their old Jaguar or Land Rover every three or four years.
The new product will mean that buyers will know right from the start of their finance contract what the guaranteed future value of their Jaguar or Land Rover will be. This will allow them to go ahead with an option to either renew, retain or return the vehicle at the end of a pre-determined term.
Speaking to BusinessTech, Viola Rossouw, financial services manager for Jaguar Land Rover South Africa, said that the company foresees ‘usership’ models replacing more traditional ownership type sales strategies in the coming years.
“All we need to do is look at more mature markets around the world – we anticipate South Africa (and South African consumers) will align ever more closely with an ever-evolving way of accessing value in place of all-out ownership,” she said.
“There will be those that still elect to own their assets and, as a consequence, we will continue to make competitive financing options available to meet as broad a base of customers – not only for now but also into the future.”
She added that GFV programmes have been implemented by a number of original equipment manufacturers and retailers in South Africa in recent times, however it was important that these sellers constantly assess their offerings in terms of what customers are demanding.
“As ‘end of term’ risk gets pushed away from the consumer, programmes like GFV will become more prevalent,” she said.
Below Rossouw broke down some of the pros and cons of ‘usership’ vs buying a car outright in South Africa.
Pros
- Allows you to drive a vehicle that could be out of your price range otherwise, due to the fact that you are only financing a portion of the vehicle over a defined time. This is based on the fact that you are only paying for the period of use, as opposed to the entire term.
- Depending on the terms of your agreement you can drive a new vehicle every three to four years. As technology and product enhancements are made, constantly improving the user experience, one is able to keep abreast of these and utilise the latest technology available.
- A consumer does not need have the initial resources to put down a deposit – these programmes cater for no, or low, deposits.
- At the end of the finance contract, consumers have no risk whatsoever. Renew, retain and return are straightforward processes that our retailers are all geared to assist with.
Cons
- There are certain consumer obligations, central to which is an annual distance (km) restriction. Should a consumer exceed the distance restriction by the end of the contract term, the GFV falls away.
- There are other obligations in respect of fair wear and tear and consumers will need to abide by these to ensure that the end of term processes can be seamlessly facilitated.
Pricing
Rossouw also provided the pricing differences between buying a Land rover Discovery through traditional instalments versus the new GFV product.
However, she noted that with a GFV agreement, the customer is not obligated to settle or refinance the GFV at the end of the term.
“With this product there is an option to either renew (trade in for a new Jaguar or Land Rover), retain (settle or refinance the GFV) or return (hand back the vehicle),” she said.
Click to enlarge.
Land Rover Discovery 2.0 P 221kW S – R988,724
Land Rover Discovery 3.0 D 190kW HSE – R1,288,006
Read: Jaguar Land Rover launches flexible new financing terms
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