The 0.25% base rate rise accompanying the announcement was widely predicted as a sign of the new Government's tough economic stance but will have minimal impact on the industry. In the longer term, lower interest rates and a more stable monetary environment should drive down contract hire rates as leasing companies pass on the benefits of cheaper lending and reduced risk to end users.
A British Vehicle Rental and Leasing Association spokesman said such a small rate rise would impact little on either the short term rental or longer term leasing industry. He said: 'It will have an effect on new contracts but it will take time to work its way through. It is the underlying economy which is more important and the effect that has on residual values. A stable economy and inflation under control is more important.'
Leasing companies were confident the rise would have no immediate impact and welcomed the Chancellor's decision on monetary policy. Chairman of the BVRLA's rental committee John Leigh said the rise was not unexpected and added interest rates were one part of the rental rate equation but not the biggest part. Issues such as residual values were more important.