For a year now a company called Ariva has quietly been leasing cars to private individuals who have otherwise been turned down for standard finance by the banks.
If the venture continues to succeed and grow, it could change the way people access new motor vehicles, specifically increasing the number of new, fully insured cars on the road, and take business from traditional purveyors of finance. And the transaction falls out of the remit of the National Credit Act.
At the heart of the business is the seemingly odd marriage of a passenger car importer and a furniture retailer.
› House have become more affordable - FNB
› New car lease model challenges banks
Launched in January last year, Ariva is a full joint venture co-owned by Imperial Holdings and its partner, the JD Group, of Joshua Doore, Russells, HiFi Corp and Incredible Connection fame. And it is JD Group’s expertise in doing business with, and making money from, "those financing their furniture" - an LSM with some disposable income - that gives the joint venture so much potential.
"JD Group understands how to collect the money, so we partnered with them - we use their scorecard and their account-management systems," says David Smith, MD of Ariva, who is in evangelical mood: "I just love this model!"
"People rent houses and buy cars! It’s madness. It should be the other way round," Mr Smith says.
The product, in hindsight, is a blindingly obvious result of Imperial leveraging its various business units. It imports cars, runs a financial services company, Liquid Capital, and has a network of car dealers and workshops. And where it needs to look outside the group - the fitment of tracker units, for example - it can use economies of scale to keep the costs down. "I don’t pay retail," Mr Smith says.
As a result, a customer approved by the JD Group scorecard can lease, for example, a one-litre Kia Picanto for as little as R3,093 a month. Given the fact that "it’s my asset", as Mr Smith says, the cost includes fully comprehensive insurance, a tracker service, roadside assistance, accident management and the cost of the service plan. And the majority of the business goes back into the group.
In addition, the model offers protection to Ariva.
The process of "repossessing" a car is much simpler, the vehicle can always be found as a result of its satellite tracker and, of course, a repossessed car can always be leased again.
Article continues on page two...