Fleet News asks key industry figures their opinions on the issues challenging the industry.

Finance: Manufacturers miss out by shunning retail

by John Lewis, director general, BVRLA

Aspirational magazine adverts, television commercials and road tests play a role, but it is often the dealership test drive that seals a business car sale.

However, is a half-hour zip around the suburbs while you are trying to locate the indicators and adjust your mirrors really the best environment to assess a vehicle?

Recent research suggests there is a better try-before-you-buy method – the rental car.

A study conducted on behalf of a leading rental company shows that manufacturers can get a significant marketing benefit from this sector.

There are around 12 million car rentals in the UK each year.

Rental companies get around 30 rentals per vehicle, with an average of 3.5 people either driving or travelling in the car each time.

In other words, a manufacturer is giving 105 extended test drives for each car it provides to a rental company.

On average, 70% of UK customers end up driving a model they have not driven before.

And the experience is mostly positive, with 59% of people saying their opinion of the vehicle make had improved, 54% saying they would recommend the particular model to a friend and 43% saying they were more likely to add it to their own shopping list.

This research leaves me with two main thoughts.

The first is that even manufacturers with a well-established business car profile should think twice before spurning the rental market.

The second is that rental could provide a great shop window for some of the up-and-coming Asian carmakers.

After all, they have a well-made, great-value product – all they need is bums on seats.

Vehicle procurement: Lead times can give brokers enormous headaches
by Adam Tyler, chief executive, National Association of Commercial Finance Brokers

One of the problems for brokers is the lead times of even the most common cars.

This, combined with current market conditions, can cause enormous headaches.

Lead times on cars, for example a Ford Mondeo diesel, are anything up to 20 weeks.

There is little option for buying ‘off the peg’, as even the most basic cars come with a veritable cornucopia of possible extras.

For anything a little more sporty,or luxurious, you can wait more than six months between ordering and delivery.

The Audi A3 Sportback diesel is a case in point, with a quoted delivery time of early 2009.

The real problems come for the broker when arranging the finance for these deals.

By the time the car arrives, there is potential for the finance – agreed with the client at the time of ordering – to have changed.

And, because of the squeeze on all finance companies at the moment, the change is usually an increase.

Funders are willing only to secure their rates for three months at the most which, set against the five-month lead time for the diesel Mondeo, leaves the broker and client in a state of flux which can cause a number of possible problems.

Firstly, if any of the variables on the deal change in the five months, the client has no idea what their repayments will be by the time the vehicle arrives, impacting on budgets.

Secondly, if the client experiences a downturn in their own fortunes, at the renewal of the finance approval they may simply have their application declined and, thirdly, the longer a car takes, the longer a client has to simply change their mind.

Rental: Five simple steps to a more cost-efficient fleet

by Colin Tourick, author, Managing Your Company Cars

As the economic clouds grow darker, fleet managers will be wondering how to respond. Is now the time to move from outright purchase to contract hire?

Or in the other direction?

Or is there some better and cheaper product out there?

If redundancies are being discussed, what can be done to avoid large early-termination charges from contract hire companies?

In fact, what can be done to reduce general costs?

I’ve produced a checklist which may be useful:

• Avoid early termination on leased vehicles, redeploy them within the firm and ensure the early-termination clause in your agreement is as good as you can negotiate. Also, renegotiate contract hire agreements mid-term rather than building up excess mileage charges.
• Choose the right financial product, making sure you include tax costs and benefits in your evaluation. Move to a fixed list, not a user-chooser policy. Use wholelife costs to select vehicles and make sure cars are serviced regularly.
• Use demonstrator cars where available and consider taking cars on daily hire rather than allowing employees to use their own vehicles.
• Investigate whether it makes sense to have one manufacturer’s cars across your fleet and consider pool cars for occasional journeys. If you have a large fleet, consider taking third-party motor insurance and self-insuring the comprehensive risk.
• Consider introducing a cash-for-car scheme or an employee car ownership scheme and the take-up of low CO2 cars.

These measures will stand you in good stead and will make you the finance director’s best friend in turbulent times.