Recent years have seen the leasing industry change at a rampaging pace. Companies are being swallowed up by larger competitors, leading to several firms with fleets of more than 100,000 vehicles.
Is this trend for consolidation set to continue? If so, it could mean a radically different landscape to the industry.
Fleet News spoke to some of the leading figures in the fleet industry to find out how they see the future progressing and what it will mean.
Most seem to think the trend will continue, but disagree over how that will affect customers.
If you have a view, contact firstname.lastname@example.org.
Managing director, Lex
“In the next 10 years there could be a handful of companies with between 150,000 and 400,000 vehicles, a small collection of manufacturer-based finance companies backed by the big finance houses and the rest will be smaller suppliers with a few thousand vehicles on their fleet.
“Contract hire will increase its share of the overall fleet finance market. More companies will discover the fleet is an unwelcome distraction to their core business and will opt for the fixed costs, reduced administration and VAT benefits that contract hire brings.
“Larger suppliers are more likely to provide further flexibility to the benefits package to include company motorists and non-company drivers while manufacturer based companies will continue to work with dealers to fund cars to smaller local fleets. The smaller contract hire suppliers will provide an important service to the huge untapped small business sector that would normally purchase its cars outright or on hire purchase.”
Managing director, LeasePlan UK
“The consolidation of the leasing industry has made a lot of headlines over recent years.
While some of the later deals we’ve seen may not be replicated in terms of sheer size, consolidation is a trend that is likely to feature in the industry for the foreseeable future.
“One of the key reasons for this is the increasing sophistication of the industry. To provide a robust leasing service today, a wide range of skill sets, technologies and support services are needed.
In addition, larger companies ultimately benefit from economies of scale, which in turn can be translated into greater cost efficiencies for customers; a key benefit in such a competitive environment.
As for the impact on the customer, it depends on how the changeover is managed. If done well, access to a wider range of expertise and resources can be a big benefit. If done badly, teething problems can overshadow all the plus points.”
Managing director, Lloyds TSB autolease
“Consolidation can give significant benefits to fleet managers. To meet the needs, wants and demands of their customers, fleet suppliers need to continually invest in robust solutions.
“A larger supplier is better equipped to make these investments, to develop expertise, introduce appropriate technology and refine their systems. A fleet manager dealing with a supplier of significant size also benefits from their supply chain relationships, buying power and other economies of scale, which ultimately results in more competitive vehicle funding and management.
“A fleet manager’s potential concerns over becoming a small fish in a large pond should quickly be dispelled through the high levels of service that investment, training and monitoring will offer.
“Larger suppliers are also in a great position to invest in understanding their customers’ needs. We know that we can only be successful if we offer the highest level of service to all customers; that’s why we structure our business to understand and satisfy the needs of each individual group.”
Marketing director, Masterlease
“Consolidation will continue as companies fight for their place in a saturated, commoditised, mature market.
“Given that market growth is flat, that means those with fleet growth targets can only grow at the expense of competitors, which is not easy, or perhaps by acquiring them, which is arguably easier.
“Mature markets are often evidenced by fewer larger suppliers commanding significant market shares and numerous niche players either targeting small market sectors or providing really personalised service. The contract hire market will inevitably follow this trend as well.
“Big organisations with deep pockets, global capabilities and significant buying power will exist alongside much smaller and more nimble businesses. As I see it consolidation will occur in the ‘middle market’ where organisations have overheads that are too high to offer the cheapest prices or where they have limited innovation and cannot differentiate in terms of products or service levels.”
Managing director, Grosvenor Contracts Leasing
“In our view, the trend towards growing larger providers will reduce choice for the customer – this will not benefit any fleet operator, particularly those operating smaller numbers of vehicles.
In a fast-moving commercial environment it is critical that contract hire companies are able to respond to change and it can be difficult for the bigger, bank-owned organisations to retain that personal and flexible approach to their clients.
“As a company, we will continue to benefit from these mergers and acquisitions, as we have secured a number of clients that have been attracted by our ability to respond to their needs.
If the consolidation continues, I can envisage a similar situation to that of supermarkets’ monopoly, the difference being that the fleet operator will not see the same benefits brought on by the economies of scale that supermarket customers enjoy. We will continue to work hard to ensure customers retain their right to choose.”
Head of product management, Arval
“The leasing industry has witnessed significant consolidation over the past five years and we expect it to continue steadily. However, this doesn’t necessarily mean complete dominance by a selection of key players. There is still room for smaller fleet management companies to make a considerable impact within the industry.
“In terms of funding options, contract hire will remain the dominant fleet acquisition system and we will begin to see a larger market percentage penetration at SME level. Other funding methods will remain available for those customers with a more complex or specific vehicle requirement but there is no foreseeable shift in contract hire popularity.
“The impact of growing legislation is driving the fleet industry to shift its focus around how contract hire funding options are arranged. The development of funding packages was previously driven solely by competitor pricing. However, fleet providers are now realising the need to produce more innovative packages which centre on service delivery and take into account the individual green or duty-of-care needs of the customer.”
Director, Fleet Audits
“The fleet leasing business in the UK is a powerful industry, now dominated by the banks and financial institutions. It does seem inevitable that some consolidation will still take place each year but this will be in part compensated by the arrival of new businesses – perhaps those formed by senior figures ‘delayered’ from the consolidations.
“From the client perspective, the two big factors are costs and service levels. Innovation is valuable but nothing like as well regarded.
“If consolidation produces real economies of scale and price stability, then the client base will be fairly happy. This will be particularly true for suppliers who plough resources into real service delivery and good, high-quality account management. If mergers don’t yield price stability and acceptable service delivery, then there will be openings for new – possibly niche – players to develop.
“A healthy slice of the whole fleet customer base has always focused on the service side rather than on pared costs – that’s one of the key drivers of successful outsourcing.
“Suppliers who recognise that will succeed. Those that don’t will become prey to bottom-end fleet operators only interested in cheap rentals; then to being on the receiving end of a consolidation.”
Director, Colin Tourick and Associates
“The trend of mergers and acquisitions will definitely continue. While there are few independently-owned lessors left for the giants to target, I do expect to see a number of the medium- sized and larger players changing ownership in the next few years.
“We already have a handful of large firms having a significant market share. As consolidation continues, we will have more firms with more than 100,000 vehicles each but there will still be a very secure place in the market for the smaller firms because customers like the personal service these businesses can provide.
“One of the benefits of consolidation has been the very significant investment in new technology and training by the larger players and I expect this to continue – it can only benefit the customer.
“It remains to be seen how further consolidation will affect the services available in the market. Some of the most innovative changes in recent years, such as the growth of employee car ownership schemes and the growth of nearly-new vehicle contract hire, were started by the smaller players and the brokers.”
Director, Emmerson Hill Associates
“I can see it getting down to 10 or so massive companies. Just look at Lex and the companies that it has absorbed.
“This would mean that the fleet manager, unless he or she is very astute, would be losing his or her bargaining power. Most leasing companies tend to be owned by banks.
Because of the way banks operate, they are so rigid in their systems they don’t have much leeway to do things any other way than it says in their book.
“Particularly, there will be very little room for negotiation at the back end of contracts. Where you get a fleet of substantial size they will have some negotiating power but the smaller fleets won’t. I think they’re going to lose out unless the leasing industry becomes more flexible – I think it needs to have a look at itself.”
Director general, British Vehicle Renting and Leasing Association
“While consolidation will undoubtedly con-tinue and the larger players will grow further, it will allow more companies to achieve the critical mass necessary to provide a wider range of innovative products and then market these through an increasing variety of channels.
“I see this as a constantly changing, constantly improving marketplace where not only are the larger players consolidating their positions but where many medium companies, the well-managed, owner-driver independents, are making strong growth.
“We have seen too, the rise in the last few years of the leasing broker, the best of whom are highly professional organisations providing their clients with a safe, reliable and quality service.
“None of this makes the fleet manager’s choice any easier, of course. He is faced with a wider selection than ever before but with careful consideration of his or her company’s needs there is now bound to be an appropriate solution.”