As Lex Vehicle Leasing owners Lex Service and Halifax set aside £90 million to cover expected residual value losses over the next three years and the firms pump a further £50 million into the company, it has emerged that only a handful of leasing companies could be profitable.
And with every contract hire company beset by the identical residual value crisis facing Lex Vehicle Leasing and numerous leasing companies owned by financial institutions, fears are growing that losses are now so large that banks may no longer continue to invest in operations. Industry experts believe residual values will continue to fall in 2001, although at a much lower rate than this year.
Amid widespread rumours that a number of leasing firms, including major 'names', are actively looking for buyers, banks and finance houses have been speaking out to show their commitment to their leasing subsidiaries.
Steve Taylor, managing director of GE Capital Fleet Services, the largest leasing company in the UK not owned by either a bank or a vehicle manufacturer, said: 'All the big companies have financial institutions behind them and they are notorious for not subsidising failing businesses. They will invest in businesses which make a return.'
But John Lewis, director-general of the British Vehicle Rental and Leasing Association, said predictions of banks pulling out of contract hire were 'scaremongering'.
Colin Tourick, managing director of Associates Fleet Services, said: 'There would be no justification for that to happen. With the smart money on an economic slowdown, leasing companies have to be here for the long term.'