Fleet News

Leasing growth predicted, despite Labour stance

THE British Vehicle Rental and Leasing Association is predicting continued growth of the corporate contract hire market despite Government commitment to curtail the UK's car culture. In its annual Statistical Review, the BVRLA's members predict a significant increase in car and van fleet sizes as business confidence continues to grow.

The vast majority of the BVRLA's 1,059 rental and leasing members (85%) are predicting an increase of at least 6% in their fleet sizes, with more than a third (35.6%) forecasting an increase of 20%. Across the board, growth of 10% among BVRLA members would equate to an additional 110,000 company cars on British roads.

Last year the BVRLA long term rental fleet increased 7.6% to 1.21 million vehicles of which 92% are cars and the short term fleet increased by 8.5% to 213,197 vehicles of which 72% are cars.

LEADING contract hire companies are making more than £1,000 clear profit on every vehicle according to the latest research from the British Vehicle Rental and Leasing Association. Almost a third (28%) of leasing companies make £1,000 or more per vehicle by the end of a typical three-year contract and nearly half (48%) between £500 and £1,000 and while 5.5% of companies actually make a loss on their vehicles, profitability across the board is up by almost 9%.

The survey also shows that although the daily rental car parc has increased by 43% since 1990, the contract hire car parc has only grown by 9% - illustrating corporate customers' reluctance to commit to longer term vehicle funding while they fill the gaps with expensive short term hire cars. Other variations in funding such as finance lease and contract purchase continue their steady decline to the benefit of contract hire, which continues to grow in popularity as a funding option.

The report says the boost for contract hire widely predicted as a result of the changes in VAT treatment in 1995 is finally manifesting itself as steady growth rather than a short-lived boom. It also finds greater stability in the contract hire sector, with more or less static demand in the large fleet sector, but rapid growth amongst small and medium businesses, which are increasingly being targeted by the industry to compensate for the smaller margins in the more competitive big fleet arena.

DESPITE the overall buoyancy of the contract hire and leasing market, the big three manufacturers continue to lose market share according to the latest research from the British Vehicle Rental and Leasing Association. Although vehicle acquisitions are still dominated by Ford, Vauxhall and Rover, the growth of user-chooser company car allocation policies have seen other marques increasing their penetration and closing the gap on the front-runners.

The survey reports increasing diversification of the types of cars included in fleet policies, charting a trend towards more 'lifestyle' vehicles such as MPVs and 4x4s as fleet lists become more flexible. Members predict contract hire rates will rise by 5% and fleet sizes could grow by as much as 25% but the consistent growth in three-year/60,000 mile residual values is expect to slow.

The average predicted increase in residual values is 1.86% with most respondents (68%) expecting increases of between 1% and 5%.

LEASING company profits contrast dramatically with the daily rental industry's wafer-thin margins as operators become increasingly dependent on manufacturer buy-back deals to limit their exposure to a turbulent used market.

The report says: 'The highly competitive nature of the business is reflected in ever more competitive rates until profit margins become wafer thin. As a result of this and the lower rate of increase in prices in the used car market compared to conditions a year ago, daily rental operators have become increasingly dependent on manufacturers' terms.'

Although the report says major manufacturers have reduced daily rental business and extended replacement cycles, Ford and Vauxhall's daily rental market shares remained more or less unchanged, although Rover's market share slipped from 18% in 1995 to 11.9% in 1996.

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