Fleet News

Leasing takes lead over outright purchase

CONTRACT hire is the number one method of company car acquisition in the UK as the slump in outright purchase continues. The latest Monks Partnership survey reveals that 42% of companies contract hire or contract purchase their company cars compared to 34% five years ago.

Meanwhile, in 1996 outright purchase was the dominant acquisition method - favoured by 37% of companies - but that total has dived to 27% this year. Outright purchase has traditionally been the favoured acquisition method of large companies running major fleets as they use their buying clout to benefit from bulk discounts from manufacturers. But the latest report suggests that the most significant move away from outright purchase is among large companies with a turnover of more than £500 million.

Five years ago the Monks report said 50% of companies with a turnover of £500m-plus purchased their company cars. The latest report claims that has dropped to 31%. The catalyst for the boom in leasing as a method of company car acquisition were the 1995 changes in VAT which saw companies able to recover VAT if company cars were used 100% for business. That led to some major companies setting up in-house leasing schemes and a general industry-wide reduction in contract hire rates.

Meanwhile, companies have also looked to outsource non-core activities and, coupled with vehicle residual value uncertainty, that has led to a leasing bonanza. Ease of administration and fixed monthly costs were two of the reasons quoted in the report for firms opting for leasing. Of the other company car funding methods available 9% of companies chose finance lease - identical to five years ago - 2% of companies operate personal leasing companies - identical to five years ago - and 20% used mixed methods of funding - 2% up on 1996.

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