Fleet News

New Order could lead to new chaos

THE much hyped Supply of New Cars Order came into effect at the beginning of September: it was accompanied by a string of changes in new car prices, some of them expected, others a surprise. The Order is aimed at reducing new car prices to the private buyer; and, simultaneously, at moving those prices closer to the acquisition figures achieved by fleet operators.

Professor Peter Cooke, head of the Centre for Automotive Industries Management at Nottingham Business School, believes the Government's publication of its new Supply of New Cars Order could open a Pandora's Box across the fleet industry

“While the Government may trumpet its success in forcing down new car prices, at least on paper, there are other parts of the supply chain which will be affected, and which are even more important for the well-being of the industry than the tabloid headlines,” said Cooke.

“Short term, new car sales will rise: demand is pent up. However, expectations, even in the fleet industry, may have been built up to expect further reductions in new car prices, but one must be realistic. We are all in business to make profit - and that includes the motor manufacturers.”

Fleet operators, have been showing considerable concern over the decline in used car prices. About 5% over three months would appear to be a consensus. While dealers have tried to run down their stocks of used cars, this has pushed the situation further into the negative. It could be a vicious circle with used car prices spiralling down further. “The impact on the fleet industry will be felt most strongly by the leasing companies who, although they have been making provision for declining used car prices, may not all have moved enough. This could well spark off a new round of amalgamation, acquisition and rationalisation,” added Cooke.

“Companies should be grasping the nettle now and examining their car allowance policies and, if they use contract hire, be talking to their suppliers about future pricing policy. There is a strong undercurrent within the industry that contract hire rates may well be held, even increased, because of the changes. Further down the line, the used car market is likely to be unstable for two-three years.”

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