The booming leasing industry in Kenya is likely to bring about competition and innovation on how individuals and business acquire assets to run their operations. A flexible lease option can be beneficial to consumers in meeting their specific needs and helping them counter changes in market conditions.
Through leasing, institutions and individuals acquire various types of movable assets, especially vehicles where the lessee pays a regular fee to use the asset without the risk of owning them. The existing lease market, however, does not change with uncertainties in economic conditions like project cancellation. It locks clients throughout the entire lease period without an exit plan. Businesses which only require truck services during peak seasons fear incurring losses while paying for the asset once the demand goes down. The approach is cost-demanding because you have to pay for the asset even when not using it.
An idle equipment turns out to be a liability rather than an asset thus lowering profit margins. In case of a finance lease you cannot take a break while servicing a loan. If a borrower fails to pay back the agreed amount to the bank, they risk their assets being repossessed.
Regional leasing firm, Vehicle and Equipment Leasing Limited (VAELL) has introduced a program, dubbed “Timeshare”, which allows clients to break an existing lease without financial penalties or legal repercussions. The lessor has designed the product for companies and individuals aiming at freeing their leases from financial commitment should their personal circumstances change unexpectedly. The new product will gives them an opportunity to lease the asset at a time of demand, taking breaks when the demand goes down.
Timeshare comes as a sigh of relief to businesses that are seasonal as the product allows clients to return assets until such a time a contract is renewed. The chances are that some unforeseen event and challenges resulting in a change to financial situations may happen at some stage during the term of a lease agreement. The clients will be expected to issue a three-month notice prior to breaking for a maximum of two months before resuming the lease under the existing agreement.
VAELL becomes the first leasing firm to implement lease break program for SME’s and the broader market in the region and is expected to bring new developments to the lease market.
Bertha Mvati, lessor’s MD for Kenya said, “We understand fluctuating business environment and we would like to help our clients. With timeshare, customers get to match their asset lease requirements with not only their long term needs but also their short term needs and pay absolutely nothing when taking a break from the lease,”
“The new product will provide break options for our clients and is in compliance with the new IFRS. We have not attached legal demands when a client decides to take a break before lease maturity. If your business is seasonal, why should we lock you in?” She added.
This program will benefit lessor’s clients in the 18 African countries where the lessor has presence including Kenya, Uganda, Tanzania, Rwanda, Southern Africa and Asian Market.