Fleet News

Leasing and rental firms bear brunt of RV crisis

THE contract hire and daily rental industries have been the main casualties of the residual value crisis over the past 18 months, but most companies see the beginning of the year offering a glimmer of hope. However, a significant upturn in residual values is still some time away with the next year being a period of stabilisation and the chance to begin the recovery period.

Interleasing managing director, Len Clayton, said the used car market had turned quite strongly in late January and early February and was much stronger than the last six months of 1999. He said: 'My belief is that the effect of continuous downward pressure on new car prices has now been reflected in residual values. We are at the bottom of the valley floor, but as of next year we will see a steady recovery in residual values in line with inflation. This downturn was still not as bad as 1991, but our industry was caught out this time and did not read the downturn.'

Andrew Mann, managing director of JCT600 Contracts, said that it had weathered the storm by not chasing low rentals and being cautious about its growth strategy. He said: 'We are profitable now and we can see sunny uplands in a couple of years' time - 2002 will be the dawn of a new era and those that get through it will be OK, but there will be some casualties along the way.'

At daily rental firms, hit hardest by the residual value fall, there is cautious optimism. Enterprise Rent-a-Car managing director, Jim Burrell, said: 'Our early returns for January have been broadly stable compared with last year but it is still too early to say if the market has stablised and hit the bottom.'

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