Leasing popularity expected to raise demand for new models in Brazil

Article by Anita Panait, on October 2, 2013

An increase in leasing in Brazil is expected to hike demand for new models as a tax incentive expires in the country. Anfavea, Brazil's auto-manufacturing trade group, is in discussions with the Brazillian government to adjust rules so that banks issue more leases, according to President Luiz Moan Yabiku. He said that new regulations should make drivers -- not banks as the autos' legal owners --responsible for any fines or taxes levied on leased vehicles.

According to Moan, local authorities force banks to pay fines or taxes when motorists try to avoid them, leading to the decline of leasing as a source of auto financing. He said that leasing accounted to about 1 percent of financed vehicles in 2013 from about 40 percent six years ago.  "Leasing suffered a very big setback because some states started to charge back taxes and tickets to leasing companies rather than to lessees," Moan told Bloomberg in a Sept. 20 interview.

Leasing, however, may recover once temporary tax waivers and cuts applied on new-car sales end this year. Such recovery could help ensure a strong local auto market with output expected to hike to 5.7 million units by 2017, according to Anfavea. Carmakers are making BRL73.1 billion ($32.7 billion) in investments in Brazil to expand or construct plants through 2017.

With a car-to-population ratio of one car for every six inhabitants, Brazil is considered a safe wager for carmakers, which will also see exports double to 1 million vehicles annually, according to Moan. German luxury carmaker Audi is planning to revive its production in Brazil in 2014, eight years after ending output in 2006 due to poor sales. It is investing BRL500 million in Brazil by 2016 and is planning to build its A3 sedan and Q3 SUV at a plant in Sao Jose dos Pinhais.

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