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Peugeot dealer discloses Sh2.5 billion State leasing deal

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Peugeot dealer discloses Sh2.5 billion State leasing deal. PHOTO | POOL

Peugeot dealer Urysia Limited leased 300 vehicles to the government at a cost of Sh2.5 billion, marking one of its largest deals in the new vehicle market where the State remains the single largest customer.

Details of the contract have been disclosed in a court case pitting the dealer and a former employee who was awarded Sh600,000, representing a part of a larger claim for unpaid salaries.

The lease matter emerged in the dispute since the former employee had sought to be paid commissions for the transaction, a claim that was rejected by the court.

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“Under the agreement, the respondent undertook to lease a total of 300 units for a duration of four years at Sh2.5 billion,” reads part of the judgement issued on Tuesday.

The lease agreement was dated November 30, 2015, indicating that the contract ran out in 2019. The vehicles were leased to the National Police Service.

The French car brand returned to the local market in 2013 under Urysia and sells multiple Peugeot models across passenger cars, vans and sports utility vehicles (SUVs).

The government started leasing vehicles in a strategy change it said will help cut its transport costs.

The State previously bought vehicles from formal dealers and also incurred additional running costs such as service and maintenance.

By leasing, the government picks dealers that commit to supply vehicles and take care of their maintenance over the specified number of years for an agreed sum.

The payments for the lease are spread out over the life of the contract and the vehicles are eventually returned to the lessors at the end of the period.

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The lease payments take into account the residual value of the vehicles.

Other dealers have also benefitted from the leasing contracts. They include Isuzu East Africa, CFAO Motors (Toyota Kenya) and Simba Corp.

The National Police Service and the military are among the major clients for the dealers in the leasing programme.

Besides the vehicle franchise owners, leasing brings together other partners including banks, insurance companies and intermediary lessor firms.

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