Fleet News

Residuals collapse means fleets face huge rental rates increases

FLEETS face massive increases in contract hire and daily rental rates as suppliers fight to remain profitable amid warnings of a permanent collapse in residual values. Leasing and daily rental firms are 'staring down the barrel of a gun' and have been warned by the British Vehicle Rental and Leasing Association to rethink their residual value predictions.

The BVRLA said this week that monthly contract hire rates on a typical upper medium sector company car could increase by £20 a month, while daily rental rates could rise by several pounds a day. The warning comes amid claims that the traditional economic cycle of rising and falling residual values is at an end, and that the industry is entering a prolonged period of depressed used car values which will hit leasing and rental companies that rely on windfall profits from residual value peaks.

Outright purchase fleets are also set to suffer as they see lower returns on bread and butter fleet models. Norman Donkin, director general of the BVRLA warned delegates at a Leasing Life/BVRLA conference 'Driving Forward': 'A lot of new factors suggest residual values will not increase. I believe that we will be entering an era of generally lower used car values. The message is more important because new car prices are reducing, which has never been known before. Residual values could drop by as much as £500 for an upper medium vehicle on contract hire over the course of a three-year contract making the monthly cost rise by as much as £20 a month.'

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