Fleet News

Hire rates rise 'inevitable'

RATE rises across the contract hire industry are on the cards as the windfall disposal bonuses of the last few years come to an end. As publicly quoted contract hire and rental companies see their share prices continue to tumble in the light of the second profits warning within two months by the contract hire and leasing division of Arriva fleets are bracing themselves for a sharp rise in monthly rates.

Last week's British Vehicle Rental & Leasing Association's 'Statistical Review 1997' revealed that member companies were predicting rate rises were set to increase at more than the 6% 1997 increase on 1996 despite the competitive market place and claims that some leasing companies were prepared to 'buy business at any price'. This week John Britcliffe, managing director of Fleet Cost Management, sister company to PHH Vehicle Management Services, said rental rate increases were inevitable and called on fleets to look beyond contract hire as an acquisition method.

The fate of Arriva has called into question the financial stability of some other leasing companies and Britcliffe said: 'The rates which have been written by some contract hire companies over the last few years now look to be unsustainable. Rates have been based on the assumption that windfall disposal bonuses will continue. It is now obvious they have come to a definite end. Contract hire companies have a stark choice as they face massively reduced profits - increase rates or lose money.'

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