The Leasedrive Velo Group has gone on the record with what it believes will happen to the contract hire and leasing sector during what is expected to be a turbulent 2009.
Do you agree with the predictions? Leave your comments and let others know what you think will happen next year.
The company reminds us that of the seven predictions it made for 2008, five were on target, with the jury still out on the remaining two.
Commercial director, Roddy Graham said: “No surprises that 2009 will be an extremely tough year but for those contract hire companies with secure funding lines for the short to mid-term, the future presents some potential great opportunities for organic growth and growth through acquisition.
“As never before, the better managed companies will be those that survive.
"The winners will continue to invest in systems and people, and not follow the herd instinct!”
With some contract hire companies closing their doors to new business, and others losing money due to plummeting residual values, and others finding credit lines squeezed, inevitably there will be winners and losers.
While there will be some contract hire companies following car dealerships and going to the wall, there will be the opportunity for well-positioned players to cherry-pick competitors.
We will definitely see consolidation and maybe fewer bank-owned companies as finance houses concentrate on their core activities.
Creative car schemes
Contract hire companies will need to think more creatively with their ‘company car’ packages.
Even before the belt really tightens, HMRC had already calculated that the number of company cars had dropped by 500,000 in the last nine years and, unless contract hire companies work smarter, the contraction is set to continue.
From a high of $147 in July the price of oil had dropped by over $100 in mid-December to a near four-year low.
However, we should see less volatility in the oil markets next year with barrel prices expected to hold steady at around $50, mainly due to anxiety among the oil producing nations over world economic prospects.
However, if China gets caught up in the economic woes of the US, Japan and Europe, barrel prices could fall by half according to some dire predictions.
Climate change will continue to dominate the world agenda, especially with the incoming pro-Kyoto new US administration.
Expect Barack Obama to make his mark on the world stage by championing the green cause.
For him, it’s much easier to make an impact with a total U-turn than trying to sort out the mess of the Bush legacy in Afghanistan and Iraq.
The only concern is that economic woes will no doubt push some green initiatives onto the back burner.
At least our own government seemingly still seems committed to halving carbon emissions and has adopted a CO2 emissions-based taxation regime when it comes to transport.”
CO2 emissions – car design and taxation
Vehicle manufacturers will focus on sub-120g/km cars, with the target of achieving average emissions below 120g/km by 2012 still in place.
Already the most attractive vehicles in the UK are those with CO2 emissions of 120g/km or less so employees can take advantage of the reduced 10% and 13% Benefit in Kind (BIK) tax brackets introduced in the April 2008 budget.
The natural ceiling for the company car fleet will be a maximum CO2 emission level of 160g/km.
Death of the dinosaurs
The gas-guzzling four-wheel-drive will become ancient history except for those owners who genuinely need their practicality and mud-plugging attributes.
Chelsea tractors in towns will dwindle through natural wastage, fuelled by their propensity to drink forecourts dry and their plummeting residuals.
There will be a move by some away from luxury executive and high performance sports cars, which for similar reasons have seen sky-rocketing ownership costs.
However, when the good times return, unashamed displays of success and wealth, and a desire to “drive the dream”, may still prove too big an attraction.
However, this will come at a cost and may ultimately prove anti-social.”
Spurred on by vehicle manufacturer development, and no doubt the adoption by Formula One of the KERS system next season, hybrids will start making an entry into the vehicle mainstream.
Don’t expect any revolutionary change, but without doubt hybrids will have a better cachet in the years to come, supported by strong residuals.
The world watched as Manchester voted.
11 December 2008 proved a major date in urban traffic management.
Even Barack Obama and his team took notice of the free will of the citizens who “always look on the bright side of life!”
Now the result is known, a resounding 79% voting against, congestion charging will be quietly abandoned by many.
Rental growth opportunities
Tough economic times perversely can present good growth opportunities for vehicle rental providers.
While business travel cuts will impact rental volumes, on the other hand a reduction in company car benefit and pool car costs will lead to greater demand for short and medium-term vehicle provision.
Many are predicting higher rates next year due to poorer buy-back deals and restricted supply but with so many new cars unsold, expect vehicle manufacturers to perform a U-turn on responsible marketing and seek a short-term solution to their problems by flooding the vehicle rental market, assuming the rental companies can pay for them. With residuals in free-fall anyway, what have they to lose?
Move to feet management specialists
Expect a move away from vehicle manufacturer as well as bank-owned backed contract hire companies and a steady rise in fleet management specialists.
Over the coming years, we will definitely see a concentration by organisations on core activities, with the outsourcing of non-mainstream specialist services.
Fleet management specialists are bound to benefit.