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Fleet predictions for 2009

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Predictions for the New Year from some of the industry’s influential individuals

Martin BrownMartin Brown, managing director, Fleet Alliance

Now is not a good time to be taking residual value risk and we expect a swing away from outright purchase to the known costs of leasing.

Leasing will also be more popular following the changes to capital allowances and removal of the leasing rental restriction for cars below 160g/km that come into force in April.

We expect the number of suppliers to fall and have heard predictions that the new car market will fall from 2.1 million in 2008 to around 1.7 million by the end of this year.

Nigel Underdown, head of transport advice, Energy Saving TrustNigel Underdown

Organisations that escape the economic downturn will be few so fleet managers should expect budgets to be squeezed and cost control to be the number one priority.

Residuals have further to fall so plan for increased leasing costs or lower returns from disposals.

No better time, then, to maximise the benefit of sub-160g/km CO2 replacement cars when the new tax rules apply from April 2009.

Fuel will be cheaper than the average through 2008 but most drivers could achieve better mpg if the right controls or incentives were in place.

John LewisJohn Lewis, chief executive, BVRLA

I hope we will see a bottoming-out of used car prices, which will give leasing companies some breathing space and give banks confidence in extending finance to our sector.

I also expect struggling franchised dealers to sell more two and three-year-old cars and our members will make more use of them as a disposal route for their vehicles.

As for the Corporation Tax changes, I think they will be old news by the summer, although we will see longer lead times for certain very low-emission cars and executive models with sub-160g/km CO2 emissions.

Julie Jenner, chairman, ACFOJulie Jenner

Implementing cost-effective company car choice lists in the run-up to the April 1 change in capital allowance rules is the big issue facing fleet operators, while they simultaneously grapple
with managing costs down amid the economic turmoil.

The new tax rules will undoubtedly herald a shift towards sub-160g/km CO2 vehicles.

But that doesn’t mean businesses have to compromise on the type of cars staff drive as there is a range of top quality vehicles available from numerous manufacturers.

Vincent St ClaireVincent St Claire, commercial director, 1car1 Car and Van Rental

The April introduction of emissions-based capital allowance rule changes will result in a two effects.

Firstly, a fleet migration to smaller, sub-160g/km CO2 vehicles throughout the year to take advantage of the cash savings available.

Secondly, a possible surge in registration of vehicles with higher CO2 levels in the first quarter
of 2009.

For rental companies, the tax changes will result in the introduction of CO2 car bandings within conventional car groups.

Lorraine Farnon, UK sales director, Europcar UK GroupLorraine Farnon

The economic landscape has changed beyond recognition, and this is having a major impact on new car sales.

The fallout will be felt keenly by the rental sector in 2009. We are already seeing increased holdings costs and tighter restrictions in terms of vehicle mileage and age as manufacturers seek to gain more control over the vehicles coming back into the market.

I also believe there will be an increased focus on fuel efficiencies as more businesses look for ways to cut fuel consumption while also lowering CO2 emissions.

Marcus Noble, managing director, Active Risk ManagementMarcus Noble

Few in the fleet industry doubt 2009 will be a tough year, but companies still face the same challenges in ensuring they have met their duty of care obligations.

Most fleets will be familiar with the provisions of the Corporate Manslaughter Act, but the Health and Safety Offences Act 2008, which comes into force this month (January), brings in tough new penalties for breaching health and safety regulations.

These two pieces of legislation show companies cannot afford to put duty of care on the back burner, even in a downturn.

Tony HulattTony Hulatt, managing director, CLM Fleet Management

I believe the fleet industry is facing its most difficult year since I joined it in the late 1970s.

Companies are under increasing pressure to cut costs and, as a result, many will be looking to outsource their fleets to reduce internal overheads and generate additional cost savings through improved fleet management systems.

I expect short-term rental and mini-lease products to receive a boost as end-user companies look to take on vehicles for shorter periods, rather than committing to leasing them for the customary two or three years.

Rob Barr, group communications director, ManheimRob Barr

Dependent upon stable consumer demand, the easing up of current credit restrictions and no unforeseen market calamities, Manheim Auctions expects that used vehicle prices will remain
fairly flat in the first half of 2009, with a possible price recovery towards the end of the year.

Demand for fuel/tax-efficient cars will continue and it is also possible that the increased consumer desire for value may help to stimulate the executive and 4x4 segments.

 


Phil Moorhouse, managing director, Northgate Vehicle Hire Phil Moorhouse

Boards of directors will be putting pressure on fleet managers to improve their cashflow management with credit lines no longer freely available.

Consequently, we expect to see an increasing number of fleets move from vehicle ownership/fixed-term contract hire, both of which are a drain on cashflow, to vehicle ‘usership’ with companies only paying for use when vehicle wheels are turning.

But this cost management transformation must be achieved in tandem with financially-sound suppliers who will still be operating in 12 months’ time.

Malcolm PearsonMalcolm Pearson, sales director, new vehicle supply and PDI operations, Camden Fleet Solutions

In these straitened economic conditions it will be crucial for customers to be wary of suppliers who want to ‘buy’ their business at any cost.

More than likely they won’t be able to maintain service levels long-term.

Credit terms will also come under greater scrutiny, with more suppliers reducing or withdraw them.

The consequence could be that major fleet customers start forgoing credit terms in favour of improved discounts as the security of cash flow becomes as important as the trading terms.

Gary Killeen, commercial leader, GE Capital Solutions, Fleet ServicesGary Killeen

2009 will be all about the company car as a cost-effective business travel tool.

The flexible benefits element of running a fleet will remain important, but HR departments are already finding their influence is slipping as the recession bites.

Instead, accountants and traditional fleet managers are having a larger say.

As a result, we will increasingly see fleets driving strategically, restricting car choice and introducing higher levels of managerial control.

The successful fleet managers will be those that combine cost efficiency with attractive HR policies.

Roger WilliamsRoger Williams, head of fleet services, AA

I believe we will see a trend towards companies looking to extend their existing contracts.

The challenging market conditions are also likely to lead to consolidation within the marketplace as companies seek to improve efficiencies, increase their purchasing power and reduce costs.

And as the economy shrinks we can also expect to see a reduction in fleet sizes as workforces contract and firms move away from the provision of company cars and explore alternative solutions.

Tony Gannon, communications director, BCATony Gannon

While fleets will be looking for front-end savings, they should also expect price pressure to continue at remarketing time.

Until motorists find it easier to raise finance and confidence returns to the market, there is nothing to suggest that used car values are going to climb in the short term – even so, 2009 should not see a repeat of the price patterns of 2008.

The first few months of any year are traditionally strong for used car sales and, given that used cars have never been better value for money or more affordable, we might see some improved levels of activity in the first quarter.
 

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