By Prashanth Bisnath, WesBank National Head of Sales: Fleet Management & Leasing
In fleet management, determining the optimal vehicle replacement cycle is a critical decision that directly impacts operational efficiency, safety, maintenance costs, and cash flow. With advancements in telematics and a global shift from ownership to usage-based leasing, fleet managers are re-evaluating traditional practices to remain competitive and responsive to market demands.
A well-balanced replacement strategy considers both the rising costs of maintaining older vehicles and the financial implications of acquiring new ones. Prolonging the use of high-mileage vehicles increases maintenance costs and the risk of unexpected downtime, disrupting operations and profitability. Conversely, replacing vehicles too soon can result in unnecessary capital expenditures.
Telematics enabling data-driven fleet decisions
Telematics has revolutionised fleet management by providing real-time insights into vehicle performance, driver behaviour, and maintenance needs. Predictive analytics in these systems help fleet managers pinpoint the precise moment when a vehicle’s operational costs outweigh its benefits. This data-driven approach optimises replacement cycles, improves cash flow, enhances safety, and reduces maintenance costs.
By aligning replacement schedules with performance data, companies can minimise the high costs of frequent repairs, preserve capital, and ensure financial stability. Regularly updating fleets with newer models equipped with advanced safety features also reduces accident risks. Meanwhile, telematics-powered proactive maintenance helps identify potential issues before they escalate, lowering repair costs and extending vehicle lifespans.
Financial partnerships reducing risk and enhancing efficiency
Financial institutions play a key role in fleet management by absorbing risks associated with vehicle acquisition and depreciation. Leasing and financing options allow businesses to maintain modern fleets without large upfront investments, enabling them to focus on core operations while financial institutions manage asset risks.
Leasing models—such as full maintenance lease agreements—offer comprehensive solutions, including vehicle procurement, maintenance plans, market-related sale and leaseback options, end of term vehicle disposal, license renewals, tracking, insurance, and roadside assistance. These solutions ensure predictable monthly costs, helping businesses optimise fleet management while preserving cash flow and avoiding unexpected maintenance expenses.
The global shift to usage-based leasing
Around the world, there is a noticeable shift from vehicle ownership to usage-based leasing. In the United Kingdom (UK), an estimated 20-30% of new cars are leased rather than purchased, with over 1.6 million people now opting for leasing. Factors such as low interest rates, favourable VAT policies, and a strong used car market have contributed to the popularity of leasing. In addition, the growing demand for connected and electric vehicles has made leasing an attractive option, providing businesses with access to the latest vehicle innovations without long-term financial commitments.
Africa is also seeing growth in leasing, particularly in Botswana and Namibia, where fleet volumes expanded by 42.4% in 2022. In South Africa, the rental fleet size reached 64,200 units in November 2023—a 14.2% increase from the previous year. The Western Cape led transaction growth with a 22.5% year-on-year increase, while Gauteng, the country’s largest market, recorded a 10.3% rise.
Challenges and opportunities for South Africa
Despite the global trend toward leasing, South Africa faces unique challenges in fully adopting this model. A deep-rooted cultural preference for ownership remains a barrier, with many businesses viewing vehicle ownership as a sign of financial stability. Moreover, higher interest rates and a less mature leasing infrastructure have slowed adoption.
However, the rising cost of vehicle ownership, combined with growing demand for financial flexibility, is driving increased interest in leasing and rental models. For businesses looking to optimise costs, enhance efficiency, and reduce financial exposure, usage-based leasing presents a compelling opportunity.
The future of fleet management and embracing usage-based leasing
While South Africa’s transition to usage-based leasing is still developing, global trends suggest that leasing and fleet management services will continue to gain traction. Companies that embrace this shift will benefit from enhanced safety, reduced financial risk, and greater scalability. The question for fleet managers is no longer whether to move towards usership—but how quickly they can adapt to the evolving landscape.
