Fleet News

Procurement deals on hold as firms struggle to cope with sweeping changes

FLEETS are holding back on vehicle acquisition deals worth millions of pounds in a bid to hammer out strategies to cope with unprecedented changes they face over the next year. January fleet sales were 13.8% down year-on-year, which industry figures put down to fleet managers holding back on acquisitions until they have completed fleet strategy reviews, particularly relating to the April 2002 introduction of carbon dioxide emissions-based company car tax.

Businesses also have to contend with continuing residual value uncertainty and decision-makers must prepare for CO2-based Vehicle Excise Duty next month, along with the new registration plate - the last before a new system is introduced in September - the annual expectation of Budget announcements and an imminent general election. Leasing companies, whose customers operate more than one million cars, are claiming the need to consider the future has provoked widespread short-term contract extensions.

Jon Walden, managing director of Lex Vehicle Leasing, said informal extensions - short-term contract extensions of about one month - have risen to record levels this year. He said: 'We have seen the level of informal contract extensions at the highest it has ever been. More companies are taking a long think about tax changes and extending contracts month by month.'

He estimates the level of informal extensions is now 6%-6.5% of the fleet, up from 4%-4.5%. But industry opinion is divided on whether fleets are just postponing their acquisitions, or moving out of company cars altogether, for example through structured personal leasing schemes, which provide the benefit of a company car without benefit-in-kind tax.

Jeremy Hay, managing director of ARVAL PHH, said: 'We have four major groups looking at structured personal leasing schemes, which total 22,000 vehicles. There is a number of factors in that decision, including the new company car tax system and what they should do with their fleet.'

The recent HSBC Fleet Survey 2001 predicted that fleets were taking a radical rethink of their approach to company cars, with a quarter of decision-makers saying the new CO2-based company car tax regime could change the shape of their fleet. Tim Holmes, director and head of HSBC Vehicle Finance, said the order bank had increased in January, but fleets were extending replacement cycles overall. 'We are actually seeing an increase in our order bank since the start of the year and this is a sign of pent-up demand. However, we have seen customers holding on to their vehicles much longer.'

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