Avis Fleet on Thursday entered the flexible car rental market with the official launch of iLease, joining the growing consumer shift to subscription as a cheaper option to outright ownership.
While vehicle leasing and rentals have been around for decades, iLease offers flexible leases or rental terms as opposed to fixed ones.
In emerging markets, including SA, vehicle finance — and therefore vehicle ownership — is out of the reach of most low- and middle-income earners.
Ramasela Ganda, CEO at Avis Southern Africa and Zeda, said iLease aims to respond to the growing need of consumers for choice and convenience.
“iLease is an important milestone for us in leading the charge towards a usership economy in SA. This product offering recognises that mobility is evolving, and today more than ever is redefining the way people move, connect and experience life individually.”
Current trends in SA indicate a growing awareness of the financial implications of car ownership, with most consumers not keeping their cars for the entire duration of their agreements.
Avis hopes to advantage of these trends, together with the consumer behaviour of millennials, who are more open to new concepts.
“The concept of car ownership has long been ingrained as a status symbol in SA, with limited awareness of alternative options. However, as consumers in mature markets have increasingly transitioned towards usership models such as vehicle leasing and subscriptions, the country is poised for a similar shift,” Avis said.
The group is competing in a growing market that has seen the emergence of other local start-ups such as Naspers-backed Planet42 and FlexClub.
In essence, these companies use a subscription model to give people access to vehicles. This could be seen as a form of long-term rental as lease periods typically go beyond the short one-day or one-week periods that rental companies such as Avis and Hertz specialise in. Amounts paid for such arrangements also tend to be cheaper than the cost of financing a vehicle.
In early 2022, Avis put FlexClub in charge of part of its fleet, an indication of the business model’s growing adoption at the expense of traditional competitors in the sector. Through this deal, the technology start-up and Avis created a service for long-term vehicle subscriptions.
Planet42, which raised R1.8bn of new investment earlier in the year, has developed credit scoring algorithms that it uses to bridge the lending gap, using a wider range of data sources than traditional credit scores to assess risk.
In recent years, a number of companies have shifted their business model from one-time purchases or fixed-term contracts to subscription- and annuity-based income to secure steady, continuous revenue.
This has been particularly true of technology firms such as Microsoft, which previously sold one-time licences for its Office software but now offers its Office 365 suite via subscription.
That trend is now gaining traction in the vehicle market.
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