FOCUS ISSUE: Car Rentals

Companies turn to rental cars for sake of efficiency

Car rental services have proven beneficial to numerous companies concerned with efficiency. By outsourcing their transportation needs to car rental companies, companies can not only solve their transportation-related problems, but can also cut operational costs.

The clients of car rental companies share the view that efficiency was the primary reason behind their decision to use car rental services rather than purchasing new cars.

Cornelliz Ratuwalu, who is in charge of logistics at PT Posmi, said his company's decision to use car rental services was based on the company's realization that compared to renting cars, purchasing vehicles was inefficient because of the extra money that had to be spent for car documents, drivers, and maintenance and other related costs.

"Buying new cars required an unnecessary investment," he said.

When calculated over a certain period of time, the cost of purchasing cars is higher than renting, he said.

"So we have a policy that takes advantage of car rental services, as far as the use of cars for company transportation is concerned, for the sake of efficiency," he said.

PT Posmi is a joint venture company engaged in steel processing and stamping parts.

The immediate transportation solution that car rental companies offer has attracted more companies to take advantage of car rental services. And many of these companies have established a partnership with car rental companies such as Golden Bird, PT TRAC Astra Rent A Car, PT Indorent, BP Rental and PT Indomobil Rent Car.

In the past, most companies established a policy of renting cars as part of their efforts to survive the economic crisis that hit Indonesia in 1997. Many companies that found themselves in financial trouble have since undergone restructuring, including making endeavors to cut operational costs by avoiding purchasing new cars. Instead they are working with rental car companies to fulfill their transportation needs.

New clients say that although the country's economic situation had improved, they remain cautious and are renting cars instead of buying new cars as part of their cost-saving measures.

According to clients of car rental companies, the average lease term is between one and five years, and is extendible when the contract ends. Commonly, the leases include points pertaining to maintenance, repairs, car replacements, periodical servicing and car insurance. The car rental fee, paid on a monthly basis, varies depending on several factors such as the brand, model, year and condition of the car.

Clients said that using a car rental service allows their companies to maintain a fixed budget for their transportation needs, and helps smooth out the companies' operations because any transportation problems are minimized.

"When a rental car is damaged in an accident, for instance, we just call the company and the company will immediately take it to a garage," said Cornelliz of PT Posmi.

If the car has to stay in the garage for more than a day, the car rental company will offer a replacement car, he said, adding that his company uses six cars, including sedans, minibuses and multipurpose vans, from Golden Bird of Blue Bird Group.

PT Posmi, which has Japanese and Korean expatriate executives, started to use rental car for its business operations in 1996. Initially, the company rented only one car but in line with the growth of the company, the management had to rent more cars to meet its transportation needs.

PT Philips Ralin Electronics, distributor of Philips' lights, began to use car rental services a year ago. It said renting cars was the best transportation solution for the company, considering that the use of the needed cars was only temporary in nature.

Edwin Dirgantara, sales training manager of PT Philips Electronics, said the company needed about 10 extra new cars for its sales staff on a one-year probationary period.

"If we had to buy 10 new cars, you can imagine how much money the company would have to spend at once. Luckily, there are car rental services which we can take use. In this way, we can solve our transportation problems," he said, adding that the company rented about 10 new jeeps from PT Indomobil Car Rental.

Another relatively newcomer to renting cars is PT Sambuja Poernama, distributor of Sanken and Philips electronics products. The company has been taking advantage of car rental services for less than two years.

Although backed up by 13 station wagons to distribute its electronics items to dealers, malls and markets throughout the city in its surroundings, the company sometimes needs extra cars, especially when demand for its electronics products increases, according to Arya Tanta, sales administration and logistics manager of PT Sambuja Poernama. The company began renting cars when it saw a significant increase in demand for its products two years ago.

The company decided to rent two new station wagons from a car rental company, one on a long-term contract. "Buying new cars costs a lot of money and would be inefficient, so the best solution is to rent cars," Arya said.

With additional rental cars, he said, the company could distribute its electronics items to its customers on schedule despite increases in demand.

Maintenance, repairs and periodic servicing are completely taken care of by the rental companies. "This way, we can save between 10 and 20 percent on transportation costs, compared to managing our own new cars," he said, adding that the company was taking advantage of the car rental service provided by BP Rental.

He said that the company was also taking advantage of expedition services the car rental company offered because it had regular customers in other cities, such as Bandung, West Java. The expedition service fees are calculated based on the distance.

In fact, car rental services do not attract only companies but also institutions. The Indonesian Bank Restructuring Agency (IBRA), for instance, has a policy of outsourcing transportation tasks to particular car rental companies for efficiency reasons.

Adolf Supriharyono, the agency's head of external affairs, said IBRA's move to completely outsource its transportation tasks was based on the fact that the agency's working term was limited to five years.

"By leaving our transportation tasks to a rental car company, we can focus on our job," he said, adding that the agency outsourced its transportation tasks to TRAC Astra Rent A Car.