Fleet News

Cut-throat warning for lease firms

THE UK leasing industry is cutting its own throat by writing cut-price contracts destined to end unprofitably unless there is a major increase in residual values in the year 2000.

Competition within the industry is so intense that some companies appear to be writing loss leading contracts with the aim of winning market share. They are under-cutting their rivals by adopting extremely bullish residual value forecasts, and if the used car market suffers any kind of downturn in three years' time the prospect of contract hire companies going bust is all too real.

The danger for fleet operators lies in treating contract hire as a commodity, chasing the cheapest rates available. This prevents fleets from enjoying consistency of service, from establishing a partnership with a supplier, and as a result they may accrue major hidden charges in moving between leasing companies.

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