Fleet Leasing

Finance providers 'need' to become more innovative

Row of parked cars

Companies offering finance to the fleet industry need to improve their IT systems and be more innovative with the products they offer, research suggests.

They also need to embrace opportunities arising from the delivery of mobility solutions, where fleet managers are increasingly being asked to provide a range of options for getting from A to B.

In fact, more than two-thirds (69%) of respondents to the study, which was organised by the International Auto Finance Network and sponsored by Grant Thornton, said they expected to see significant growth in the demand for mobility services over the next few years.

Tarun Mistry, a partner within the automotive advisory division of Grant Thornton, said: “Perhaps we all knew that clients were likely to demand more outsourcing services and better technology from their fleet suppliers, and that salary sacrifice would grow, but few would have predicted that clients would be reconsidering the way their employees get from A to B and the introduction of mobility solutions.

“These will be a challenge for the industry to deliver, but it is clear that deliver them they must, otherwise others outside the industry will do so.”

Mobility solutions encompass alternatives to the company car like car sharing, car clubs and public transport, but one respondent questioned how effectively they were being communicated.

He said: “Suppliers have done a poor job of defining what they mean by mobility solutions. If the consumer doesn’t understand, it won’t take off.”

The University of Buckingham Business School, which was commissioned to carry out the research, also looked at strengths, weaknesses, opportunities and threats in a SWOT analysis of the industry.

Too much regulation (14%) a lack of innovation (14%) and poor IT systems (9.3%) were identified as the main weaknesses, while regulation (16.4%) and Government decisions (16.4%) were the biggest threats. Smaller players in the sector were also accused of trying to hoodwink fleet decision-makers into signing up to unnecessary services.

One respondent lamented: “The large number of unqualified small players in the market are using consultancy, as a front for commission-earning sales, jargon to fool even less experienced fleet decision-makers into panic buying.”

Professor Colin Tourick, chair of automotive management at the University of Buckingham, said: “It makes one wonder how many fleet managers would recognise this as a fair reflection of their experience in dealing with some of the smaller players in the market.”

Tourick told Fleet News that respondents said the industry’s key strengths were it was a source of funding, efficient and its expertise. 

“Nonetheless, perhaps the most striking aspect of this table is the lack of any single strength that defines the industry,” continued Tourick.

“The most often mentioned strength was that the industry is a source of finance, though in fact only 11.5% of the respondents who answered this question mentioned  this point.”

Elsewhere in the report, outsourcing looks set to continue to grow in popularity, with 87% of respondents predicting further growth.

Three quarters (76%) of respondents also said clients are demanding innovation, particularly better technology, to help them manage their fleets as well as more flexible leasing arrangements.

In addition, most respondents believe that HR managers are becoming more influential in fleet related decision-making.

It was suggested that this was down to the rise of salary sacrifice schemes, total mobility packages, environmental, and health and safety issues.

A common view was that an increase in HR influence was to be regretted because “many in the HR community just don’t understand the wider complexities of running a fleet beyond narrow ‘recruit and retain’ considerations”, and “HR managers know very little about facility management, let alone cost control”.

Meanwhile, when asked what financial and operational issues are driving companies to decide how to fund their vehicles, 44.2% said the availability of funding, 32.7% said cost reduction, 19.2% tax reduction and 17.3% the balance sheet treatment.

Tourick concluded: “The research was carried out primarily for the benefit of lessors and other suppliers in the sector, but it also provides fleet managers with interesting insights into the ways those companies are thinking and how they believe the market will change over the next few years.”

To read the full report, click here.



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