Fleet News

Uncertainty means fleets face increase in hire rates

FLEETS face higher contract hire rates in 1998 due to uncertain residual value prospects and rises in maintenance charges. The British Vehicle Rental & Leasing Association's 'Statistical Review 1997' found contract hire companies unsure of future trends, and hedging against worst case scenarios.

'The picture is one of uncertainty; the end of consumer windfalls from building societies and other financial institutions, increases in interest rates that govern the cost of loans used to purchase vehicles, cyclical changes within the automotive market and concerns about the number of units entering the used vehicle market after three years of fleet expansion can each take their toll on residual values,' said the review.

'Nearly three in 10 BVRLA members forecast residual value reductions for cars and LCVs and minibuses of up to 6%, while a minority (about 7%) believe they will fall by an even greater amount compared with 1997 performance.' It also found BVRLA members forecasting rises in maintenance costs of between 1% and 6% in 1998 compared to 1997 - with some predicting as much as 12% - due to the increased labour rates paid by garages to skilled mechanics able to handle today's sophisticated engine management systems.

Monthly rental rates are already rising, 6% up in 1997 over 1996, and are set to go higher despite leasing companies predicting greater price-sensitivity in the market. This led the review to suggest the industry had moved away from: 'The once prevalent strategy of buying business and market share through severe under-pricing.'

The British Vehicle Rental & Leasing Association's 'Statistical Review 1997' costs £100 from the BVRLA, River Lodge, Badminton Court, Amersham, Bucks. Tel. 01494 434747.

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