Fleet News

Leasing lottery as industry divided on RVs

THOUSANDS of fleets face a contract hire lottery this year as leasing firms make wildly differing predictions on residual values which hold the key to setting monthly rentals. Some firms warn rates could increase by up to 5%, adding £16.45 a month to the cost of a typical rental rate for an upper medium fleet car, or £588 over a standard three-year lease.

But rivals are challenging the predictions and claim residual values could remain level or even rise, creating an uncertain market for fleet managers committing to individual suppliers. Confusion about residual values is caused by overproduction by manufacturers, fears of new car prices falling and competition from cheap European imports.

Ken Trinder, director of c.2K Automotive Solutions, is expecting further falls in used car prices and has downgraded values for many models. Already about a quarter of his fleet list is predicted to be worth less than 35% of its new value after three years/60,000 miles, with hundreds of models below 30%.Trinder insists manufacturers must shoulder a lot of the blame because of the number of new models they are launching - 150 this year alone.

Nick Salkeld, Lease Plan's commercial director, warned that the rising costs of long-term borrowing and an expected 5% fall in residual values meant that for this year at least, monthly rentals were likely to rise by the same amount for 'average' fleet vehicles. He said: 'We expect the used car market to stabilise in 2001, but while residual values continue to fall, leasing rates will go up.'

However, both David Yates, sales and marketing director of BCH Vehicle Management, and Len Clayton, managing director of Interleasing, felt there was a more stable future ahead for rates. Yates said: 'Unless the Competition Commission report concludes that an immediate reduction in pricing is necessary or the Budget changes current thinking significantly, I do not envisage BCH's customers will see much in the way of rental movements in the next couple of months.'

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