Fleet News

Bank move could lead to 'realistic pricing'

Peter Davenport, managing director, Motiva Group

I believe the Royal Bank of Scotland’s (RBS) decision to wind down Lombard Vehicle Management (LVM) is the latest sign of a fundamental shift in the fleet market – a shift that could allow some upward pressure on margins.

It didn’t surprise me when RBS announced it wanted to offload LVM about three years ago and, given the economic climate, the time it has taken to find a buyer hasn’t surprised me either.

The drivers behind the banks moving away from direct involvement in vehicle leasing originate from the global financial crash and the resulting desire for financial institutions to de-risk.

They have retreated into their core offers and looked to offload peripheral activities as they build up the reserves demanded by the authorities.

The move by RBS to continue lending to fleets without running a leasing arm follows similar decisions over the past two years by Barclays, Santander and Clydesdale Bank.

That leaves just three operators wholly-owned by banks in the FN50 – a fact that will have a significant long-term impact on the market as a whole.

Lombard and RBS had been looking for a buyer for LVM for about three years without much success.

I believe that was partly because LVM was so price-driven, which meant it ran at profits that weren’t attractive to potential buyers – especially in these risk-averse times.

As banks retrench to what they see as their core offer, their relentless downward pressure on prices becomes diluted.

Price will always be a critical factor, and competition will continue to be fierce, but over the next few years I can see there being a bit more leeway to sell on value rather than just price.

I don’t think for a moment that things are going to be easy for the industry in the short term, but anything that independents can do to retain margin and get closer to realistic pricing is a help in a downturn.

As long as we combine that with services and products that genuinely add value for the customer then everyone benefits.

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