Leasing rates

“My issue with leasing rates is that they vary wildly from one provider to another,” Anonymous fleet manager

This fleet manager recently obtained quotes for a Vauxhall Astra Sports Tourer from three different dealer-backed leasing companies.

Prices ranged from £370 to £348 a month – a difference of £1,056 per vehicle over four years – and he is puzzled why one was so much more expensive.

“There is no uniformity in the marketplace,” he says.

And it’s a similar story with maintenance rates with variances of £40-£60 a month. He is not comparing a vast number of vehicles either as employees only have a choice of a Vauxhall Astra or Renault Megane.

“I’d like to know how leasing companies work out their rates,” he says.

The responses

Zenith says: Different leasing companies assess their risk position differently and this affects the finance rental.

A leasing company has to ascertain what they think a car will be worth at end-of-contract (its residual value).

The industry uses specialist software to assist their assessment of residual values. This allows comparison of positioning across age and mileage matrices.

This data must be regularly reviewed and updated to accurately reflect the projected disposal value of each vehicle.

We set maintenance budgets using industry guidelines and additional sense checks are performed against comprehensive historic maintenance data.

Hitachi Capital Vehicle Solutions says: This is a very difficult area for customers and one that we sympathise with.

Due to the nature of our industry we are, in effect, combining income levels and a risk forecast within one rental figure.

This leads to a very difficult decision for the customer as we may at any time vary wildly in our risk position, while our income requirements are all broadly similar.

I would recommend that customers separate the two items and ask for income to be treated differently from risk components i.e. measure interest rate, profit, fees and overheads as the income components and then track residual values and maintenance budgets as risk.

If you are comfortable that your suppliers are proposing a risk position that a) fits with your corporate strategy and b) you believe can be sustained, then the decision will come down to how much they are charging for the services they are providing.

This makes assessing the relative value of each bid much easier.