Fleet News

Halifax pledges support as Lex bites the residual bullet

HALIFAX bank has pledged its commitment to its investment in Lex Vehicle Leasing despite the contract hire firm revealing it expects to lose an average of £1,000 on every car it sells for the next three years because of tumbling residual values.

The bank and joint owner Lex Service have set aside £45 million each to cover residual value losses at the leasing firm, one of the largest in the country with about 90,000 vehicles.

The provision for the year ending December 31 will lead to significant losses in the leasing firm's annual results, although the one-off charge should allow for an immediate return to profit in future years.

Lex Service said there has been an unprecedented fall in residual values of 24% in the three years since 1998, which is expected to continue into 2001. Amid questions about the financial pain threshold of the banks that are backing leasing companies, Tony Jukes, director of asset finance for Halifax, threw his backing behind the company.

He said: 'We are fully committed to the business.' He also revealed that plans are being drawn up to develop new areas of business for Lex Vehicle Leasing to exploit its relationship with Halifax.

Jon Walden, managing director of Lex Vehicle Leasing, said: 'We have checked carefully how our residual values compare and we are about average. Most companies are experiencing what we have gone through.'

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