Fleet News

Supply cut to hit fleet rental costs

DAILY rental prices are likely to rise steeply this year as the industry battles with dramatic cutbacks in the number of cars supplied by manufacturers.

Many rental firms are having to lengthen the time they run cars by more than a third in order to cover the shortage, which will mean increased servicing and administration costs. It is likely these extra charges will have to be passed on to customers.

Industry experts believe manufacturers have cut their supply to rental firms by up to 15%, as they react to slower retail sales. A weaker retail market has put pressure on carmakers to cut back on less profitable business such as daily rental, in a bid to improve their finances.

The longer cycles will cost many rental firms dear. At six months – the traditional length they run cars – companies can defleet the vehicles before their first major service, and before tyres need replacing.

At 10 months, and with high mileages, cars are going to need more service, maintenance and repair attention before they can be remarketed. Also, according to Martin Ward, national research manager at CAP, residuals could be hit as buyers are put off higher-mileage, older, ex-rental cars.

John Lewis, director general of the British Vehicle Rental and Leasing Association, believes manufacturers need to work with rental firms to manage the problem and that supplying cars to the lucrative corporate market while cutting down on marginal, broker-based business would help supply issues.

Lewis also claims that carmakers need to change their approach and accept that daily rental is not purely a channel for getting rid of unwanted cars in times of oversupply.

He said: ‘Manufacturers need to realise that daily rental is a good marketing showcase for their cars. There are some tough decisions to be made.’

Late last year, Neil McCrossan, National Car Rental’s vice-president of commercial development, warned that prices would have to rise. However, the shortage of cars is biting harder than many industry pundits though it would.

Speaking in November, McCrossan said: ‘Manufacturers generally do deals with the rental industry when it suits them.

‘They need to take a longer-term approach, appreciating what we have to do. Instead of suddenly changing their approach, they need to give us a longer view, to allow us to plan.’

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