First introduced to the Malaysian market in 2012, Mercedes-Benz Services Malaysia (MBSM) in a short span of five years have grown their portfolio to over RM2.2 billion, with four out of 10 Mercedes-Benz cars financed by MBSM.
MBSM has definitely played an important role in supporting Mercedes-Benz Malaysia’s (MBM) position as the leading premium brand in Malaysia. From regular saloons to tyre-shredding AMGs, MBSM is ready to help you finance your Mercedes-Benz through Classic Financing (standard hire purchase), Agility Financing (Agility) or Lease2Go.
Throughout the years, the standard route of car ownership has always been through a hire purchase loan – place a down payment, pay the monthly instalments for a set tenure and own the car at the end of the period. Alternative financing solutions may never come to mind when buying your new car.
We sat down with MBSM Managing Director, Mike Ponnaz to learn more about the nature of financial products offered and whether you should finance your next Mercedes-Benz with MBSM.
Between Classic Financing (hire purchase), Agility Financing and Lease2Go, which is the more popular choice?
The popular choice is still the Classic Financing because that is what people are familiar with but the Agility and Lease2Go options are growing within our portfolio. Between three to four out of 10 cars we finance are under Agility or Lease2Go.
What is the main difference between Agility Financing and Lease2Go?
Both products are similar in that they offer lower monthly repayments, but the mechanics are slightly different. For SMEs, in their accounts, Agility is parked under Assets while Lease2Go is viewed as an Expense.
With Agility, you pay to own the car at the end of the term while Lease2Go, you rent the car for a certain period to use.
MBSM have been in operation for some time, is there a reason why you only offer two products besides Classic Financing?
You see, we can bring in many exotic products but at the end of the day, are the customers confident of what is being offered? Can the sales team explain the product to customers? It takes a bit more time because the product(s) are new to the market. So, our task is to build that awareness, build that consideration to customers and offer them a choice with our range of products.
Having these kinds of financial products have really changed the way consumers make car decisions, but will it attract bad paymasters who are unable to afford the monthly payments?
Because of the nature of the Mercedes-Benz brand, its potential clientele will naturally have a strong credit rating. Therefore, the credit strength of new clients has been pre-screened through the product because customers will think twice before taking on a contract with MBSM.
Through these financial products, say Agility Financing, you have made a Mercedes-Benz more attainable to a wider income group. What happens, when a customer stretches their budget just to go into the premium brand?
That is the intention, it’s part of an example where we can help sell more cars, by making the monthly repayments more affordable. For example, with Agility that lowers the monthly repayments, it allows the customers to do a variety of things (with their cash flow) and here is where the lifestyle part of it comes in.
We also think of ourselves as a kind of lifestyle financier, because we are financing a lifestyle. Whether it’s a two-door coupe, a four-door sedan, plug-in hybrid or even an AMG, we want to have something to cater to your lifestyle.
Coming back to the question, I noticed a trend that more and more customers from Japanese makes are moving into the Mercedes-Benz brand because we can help lower the monthly instalment say from RM7,000 to RM4,000 through Agility. It allows for these group of customers to manage their cash flow better while driving a Mercedes-Benz.
What other customer groups will benefit from Agility Financing?
Another group would be existing customers. For example, you are an existing C-Class owner but with an expanding family and you are looking to upgrade to an E-Class but because of additional commitments, you want to be more cautious with your money. Over the years, you have set aside a certain budget to pay for your hire purchase of the C-Class but now, Agility can help get into the E-Class threshold at a similar monthly instalment for a C-Class.
Another thing Agility can do for you is to allow you to make a lifestyle change. For example, you have a C-Class sedan but because of your lifestyle needs, you’re looking to get into a Coupe. Agility allows you to make the choice to go for a Coupe at a reasonable monthly instalment and because of the option to return, you can easily return the Coupe and go back to a sedan at the end of the contract.
Why I say we are a lifestyle financier is because we are able to match the needs and aspirations of customers while providing flexibility for the customer to settle, refinance or return the vehicle at the end of the contract. We do not determine the choice of the customer, we give them that option at the end of the period.
What is the breakdown of customers choosing to settle, refinance or return the vehicle?
Agility started in 2013, so we are only seeing the returns last year. The sample size is still relatively small compared to what is coming this year and next year but just to give you an idea, 1/3 settled the balloon, 1/3 refinanced the car and 1/3 returned the car. This is just an estimation based on the actuals we’ve seen and going forward, this might change and evolve further.
This confirms that each customer has their own preferences according to their aspirations and this is where the product is good because it gives the customers the option to choose.
Do you take financial products from abroad and bring them over?
Yes, but we adjust it to the local market. Just because it works in Germany, doesn’t mean it will work in Malaysia. That said, we see the (Malaysian) market evolving and maturing with individuals having more control and flexibility over their finances and sometimes even not owning a car.
Hopefully, we are there to support this trend and I think Agility does address this new consumer trend of financing their vehicles. At the end of the day, consumers want to have control over their finances and making their own choices which is why we are offering a wide range of products and services for the customers.
Moving forward, what are your plans for MBSM?
I can’t speak too much of the specifics but what I can say is that we are getting traction on the non-classical financing, i.e. Agility and Lease2Go, so this is definitely an area we will continue to develop further – to enhance our products and creating variations to the products.
There are a few products planned for this year; so for the short-term future, it’s really just to establish a strong foothold with these non-classical financing products, widen the awareness of it and refresh them with enhancements like bundling – of motor insurance, tyre and rim insurances into the monthly instalments.
Further down the road, it’s more speculative than anything but we would be looking at mobility services offered globally while identifying which services are suitable for the Malaysian market. It’s mainly about product innovation and being different from the rest of the market.
We would like to thank Mercedes-Benz Services Malaysia and Mike Ponnaz for the interview opportunity.