25.05.2020

Cars will be available for rent from June

Cars will be available for rent from June

From June, a new program Affordable Rental will start operating in Russia to support the demand for motor vehicles. By this time, the specialists of the Ministry of Industry and Trade of Russia should come to a consensus on the work of the rental mechanism and how its rate will be formed. The program is planned to be implemented on the basis of banks and leasing companies, ₽2.5 billion will be allocated for this purpose by the end of the year. 

Why is the car rental program appearing now and how is it related to the epidemic? The idea has matured in the last few years, the coronavirus has only accelerated its implementation. Let's start with the fact that most car owners have a car that is not used 90% of their time. And don’t forget that the owner have to pay for insurance, transportation tax, credit. If the car runs less than 5 thousand kilometers a year, it brings the owner only losses. It is much more profitable for such owners to rent a car when it is really necessary. 

Another reason, or even rather a trend, is the unwillingness to contact the property. This explains the growing popularity of carsharing (basically the same rent, but short term). Now this service is shut down, but after the removal of all restrictions it will start working again. The Millenials prefer to travel around the world, they can change the city and even the country in search of a better job, they do not rush to buy  apartments, cars, cottages - expensive property only burdens them. 

“The Affordable rent program will be especially relevant in the context of two trends. The first one is that a significant proportion of young people don’t want to buy cars today, but want to use them. The second is that this year it is especially difficult, perhaps even worse, for small and medium businesses. So now it is necessary to offer them an easy way to get a car for use,” said Alexander Morozov, Deputy Minister of Industry and Trade.

“One option for implementing the programme, is to create a fleet of cars in each region based on a large leasing company or bank that will satisfy any customer’s request. “A person or a legal entity will be able to borrow a car for as long as they need. It is difficult to assume, how business will be restored, therefore in the present situation, so it is important to provide flexible terms and adequate rent rates. We plan to subsidize pilot projects in the regions so that the programme can be deployed throughout the country, 
” - he considers. 
For several years now, the global auto industry has been offering its customers cars with monthly subscription fees. In Europe, it starts at around €400. 

There are a lot of pros. A rental car can be exchanged regularly (every two years) for a new one. After paying the subscription fee, there are no further costs, except for petrol, washing and possibly fines. Regular maintenance, insurance and transport tax (or property tax), change of tires, necessary repairs (unless you are in an accident while intoxicated) are paid by the company that owns the car. It also organizes the delivery of the car to the service and its return to the client. 

If a person uses the car every single day for a long time and, therefore, uses all the above mentioned bonuses, the price of €400 euros per month no longer seems outrageous, especially to Europeans with their income. After all, if you put aside such an amount from each paycheck, a decent car can be bought only in five years. And here you get the car immediately. 

Now it’s time to speak about the disadvantages of rent. In fact, the car will never be yours. In the end a person will have no problems, but no money and no car. Most likely, the car will have a mileage limit, and extra miles will be paid at a higher rate. Some brands may have a ban on visiting other countries. 

Experts of Drom.ru automobile portal have calculated the annual cost of ownership and rental of the same car to find out what is more attractive. As one would expect, it is much more convenient for such owners to rent a car when it is really necessary. 

Thus, each option of using the car has its pros and cons. It is encouraging that the number of these options is growing. After all, how was it before? Either you have a car, or not. And now it is possible to buy a car, to lease it, in a long-term leasing with a repurchase, rent, rent with per-minute payment (carsharing), and now it will be possible just with a monthly subscription fee. 

However, such services have already worked in Moscow, Moscow suburbs and St. Petersburg before the lockdown, but they have been private initiative of the two brands and worked without using public funds. The rental rate for a compact crossover started from ₽30 thousand, from ₽50 for a minivan. 

According to the representatives of the brands, the business was moving forward with benefits for the user, the manufacturer and the dealer. The last two legal entities took all the risks associated with the lease. According to the future program, the manufacturer will have no risks, because banks or leasing companies will take them. Such scheme will allow carmakers to make the deal faster. The bank pays for the car and gives it to the client who pays for the lease. In this case, the ownership of the vehicle is not transferred to the client, which reduces the risks. 

"It is an interesting business for the banks, while for the carmakers it is an additional sales channel. Today the rental of commercial cars is also promising. As a rule, it is unprofitable for private companies to keep their own car fleet, so they rent cars for specific business tasks. By the way, municipal and state authorities use the same scheme today, so the demand for commercial car rent in the near future will be quite high," said Alexander Zakharov, the Head of the key clients department of GC AutoSpecCenter group of companies.


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