Dealers win as Treasury increases car lease order
Second-hand motor vehicles at Eyre Motors yard in Mombasa on July 5, 2021.
What you need to know:
- Car dealers have been handed a boost after the Treasury increased the number of vehicles it wants to lease by 242 units, promising a big relief to the traders hard hit by low sales due to the high costs of automobiles.
- The Treasury said it will require 1,652 vehicles for the seventh round of its four-year car leasing programme, up from the 1,410 initially listed in its order book in December.
- In the programme, government ministries, departments, and agencies (MDAs) request the exchequer to lease vehicles on their behalf.
Car dealers have been handed a boost after the Treasury increased the number of vehicles it wants to lease by 242 units, promising a big relief to the traders hard hit by low sales due to the high costs of automobiles.
The Treasury said it will require 1,652 vehicles for the seventh round of its four-year car leasing programme, up from the 1,410 initially listed in its order book in December.
In the programme, government ministries, departments, and agencies (MDAs) request the exchequer to lease vehicles on their behalf.
The multi-year State vehicle leasing deal is in its seventh phase and has yielded mixed results since inception. The National Treasury has leased 6,800 vehicles since the inception of the multi-billion-shilling programme in 2013.
The plan was aimed at cutting the upfront cost of acquiring and maintaining government vehicles but has yielded mixed results, raising questions over its usefulness. The search for new vehicle lessors follows the expiry of the lease on some 1,408 vehicles booked during the fourth phase in May last year.
The Treasury had leased 1,408 vehicles for use by the national government, the National Police Service (NPS), Nairobi Metropolitan Services (NMS) and c for four years.
“The government, therefore, intends to replace all the vehicles under the above phase for a period of 48 months with an option of an extension for a further period of three years,” the Treasury said in a tender call.
Unlock funds
The government was hoping to use the vehicle leasing deal to get vehicles for its operations at cheaper costs and unlock funds for critical public spending.
However, a recent study commissioned by the Treasury shows the government has failed to reach the estimated savings target, revealing that only Sh638 million in nine years is under the vehicle leasing deal.
This translates to about Sh70 million saved on average per year against some Sh4 billion that the government targeted through the programme.
The leasing will be a boost to dealers who are contending with poor sales after customers cut motor vehicle purchases on the back of high prices.
The increase in vehicle prices has seen demand drop amid a tough economic environment.
Motor dealers earn a commission on sales, but official statistics indicate that the motor vehicle industry is facing reduced sales.
Data from the Kenya National Bureau of Statistics (KNBS) shows that 49,751 new and second-hand units were registered in the period between January and August last year, a 17 per cent drop from the 60,006 vehicles registered in a similar period in 2021.
