This is the view of one industry expert who claims that the UK’s top contract hire companies must offer a flexible package or risk sliding down the pecking order.
Jon Walden, Lex Vehicle Leasing’s managing director, believes that if leasing companies bury their heads in the sand, they will see a slump in the number of cars on their fleets.
He said: ‘Lex believes a flexible approach spells the future of vehicle management and while smaller fleets may still be happy with variations around the ‘vanilla’ contract hire product, larger companies need a less formulated option.
‘If the top 20 contract hire companies are going to continue to grow, then they have got to offer this flexible approach and rapidly develop their product portfolios over the next few years accordingly or risk seeing their fleet size reduce rather than increase.’
The contract hire industry is dragging its feet to catch up with new requirements such as changes to benefit-in-kind (BIK) taxation according to Walden, who claims that the distinction between the treatment given to smaller fleets compared with larger ones is still evident.
He said: ‘Medium to large fleets often have to accept a vanilla vehicle management service when really they require more of a raspberry ripple cone topped with a flake and hundreds of thousands.’
Industry research has shown that fleet decision-makers rank price as the most important factor when making a choice about which contract hire provider to opt for.
The Fleet Contract Hire Survey, carried out by Sewells Information & Research, a sister company of Fleet News, last year showed that communication was listed second, followed by quotation speed then supply speed.
Lower down the wish list came vehicle range, payment terms and maintenance choice with key relationships listed also as an important factor for fleets using contract hire.
Ian Tilbrook, managing director of ING Car Lease, said: ‘This is much more to do with culture and fit than price. A contract hire supplier will be able to provide clear evidence that the fleet will be managed closely, backed by detailed service level agreements, as well as providing value for money.’
One of the problems, says Walden, is that the contract hire industry has remained fairly static for the past 30 years. Since then, as changes such as those to BIK were introduced a few years ago, the industry has had to scramble to keep up.
He added: ‘Since the contract hire industry started to develop in the mid-70s, its product offering has been pretty limited. Offering contract hire with or without maintenance gave fleets benefits in the form of fixed monthly payments and additional VAT benefits.
‘Thirty years on, contract hire suppliers are still offering a similar funding option, albeit with a few more additional services added on in the form of accident management, breakdown cover and daily rental.
‘Many contract hire companies have seen steady growth through this strategy. But, in the past couple of years through changes in BIK to one dedicated to reducing CO2 emissions, swingeing tax increases on drivers who opt for private fuel and the general targeting by the Government to reduce company car mileage, fleet requirements have changed dramatically.’
This has created added responsibility for other departments within companies including HR, finance and board members.
Walden said: ‘There is extra pressure on departments as they look to their vehicle management suppliers to help give more strategic support and advice to managing their fleets.
‘Companies are considering where their vehicle management strategy fits into their overall business structure and ensure it contributes to its overall business objectives.’
If a fleet is unhappy with their current supplier, decision makers must look beyond the funding aspect when choosing a new one to ensure they receive the support, advice and service they need.
John Given, sales director at Lloyds TSB autolease, said: ‘Choosing a supplier is not just about funding. Fleet managers should find a company in which they feel confident, one with a strong track record and a sound financial footing.
‘Leasing companies have to provide the balance between meeting financial, HR and driver needs. The supplier needs to take a proactive stance on managing costs on the customer’s behalf.
‘Value-added services are increasingly important in helping a fleet run smoothly, so focus not only on the headline costs, but also the full range of services and products on offer.’