Fleet News

VAT changes finally work through

THE favourable VAT changes for leasing introduced in August 1995 finally began to persuade fleets to switch to contract hire last year. The British Vehicle Rental & Leasing Association's 'Statistical Review 1997' found a large majority of its members had increased their fleet size, turnover and profit, as fleets changed their vehicle funding methods.

'Turnover has benefited from the change in VAT regulations and confidence in the future of the economy - the former has encouraged fleet users out of outright purchase and into long term rental, while the latter has persuaded corporate decision-makers to invest in personnel and their fleet requirements,' said the survey.

It found that more than two thirds of the association's leasing members have achieved an improvement in turnover of at least 10% in 1997, while more than a third achieved profit rises of at least 16%, although the experience was not common throughout, with 14% of respondents revealing a decline in profits of over 16%. Pressure on margins was particularly keen with large fleet contracts, explaining the appeal of medium-sized contract hire companies to large, acquisitive players.

'While large customer fleets are the only dependable route to higher discounts and superior economies of scale, they sit at the most competitive end of the market. Only by acquiring business in less price sensitive sectors can these largest operators cultivate more lucrative business,' said the Statistical Review.

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