by Steve Whitmarsh, managing director, Run Your Fleet
SME businesses are often referred to as the engine room of the economy, and, while data is difficult to obtain, many commentators claim that around 80% of vehicles used for business are from the SME sector.
This has not gone unnoticed, with many contract hire providers having initiatives to entice SMEs into the world of leasing.
The needs of an SME are not dissimilar to the needs of a large organisation, and the sales process to convert these fleets to contract hire requires the same level of investment, thought and consultation. Therefore, beware of the contract hire company that has a dedicated department for SMEs (this generally guarantees SMEs get a lower level of investment, thought and consultation).
In actual fact, many SMEs are potentially sitting on a goldmine with 90% or more being outright purchased fleets, and a lack of attention from the industry is failing to help these businesses realise this value.
A typical SME with 20 vehicles, valued at an average of £6,000, would be able to add £120,000 to its balance sheet through a sale and leaseback, or, more likely with an ageing fleet, a ‘sale and lease new’. So, why aren’t they doing this?
Well, during the recession many funders would only consider fleets with 100 vehicles or more, and this drove the mid sector leasing companies to target larger fleets (some of them very successfully).
But this left a void that has been filled by broker networks that, although very good, have a transactional interest rather than a long term management interest in their customers.
The reality, of course, is that it is cheaper and easier for brokers to advertise on rate and chase transactional volume than it is to review an SME’s fleet policy, and demonstrate the benefits of releasing capital.
And, ultimately you have the issue of inertia – because there are very few providers offering an all-encompassing solution to SMEs, it is just too much like hard work for an SME to dispose of its existing fleet and lease new.