Choosing daily rental, or a short or long-term rental option, as a method of vehicle acquisition can offer fleets greater flexibility as well as freeing up cash.
This is something which companies have been keen to take advantage of during the recession, as a way to replace pool cars, as an option for new starters, or to run the entire fleet.
In the Fleet News Confidence survey, one in five fleets expected to spend more on daily rental over the next year.
The main reason is a reluctance to make long-term financial commitments via outright purchase or contract hire during the economic uncertainty.
No-one wants to be left having to reallocate or terminate vehicles early due to redundancies.
“We are gaining business from customers who, in easier times, would commit to longer-term contract hire,” says Lorraine Farnon, UK sales director for Europcar UK Group.
Rental providers, including leasing companies, have responded to this upturn in demand. Lombard’s Flexi-Rental is the latest in a run of flexible rental products to be launched by leasing companies.
“We are introducing it at a time not only when budgets are under extreme pressure from the downturn, but when the industry is also digesting the implementation of major changes to capital allowances,” says Stuart Houlston, Lombard managing director.
Flexibility is a key drivers, according to the BVRLA. Chief executive John Lewis says: “More businesses will turn to rental as the economy moves cautiously towards recovery.
"It gives them a flexible, fixed-cost and low-risk way of replacing an old van or car, providing transport for a new employee or extra capacity.
“With rental companies offering hire periods of less than a day, organisations are also using them to replace their under-utilised and difficult to manage pool-car fleet.”
Reflex Vehicle Solutions has openeda two-acre depot at Waltham Abbey
in Essex to cope with its growing customer base in the south east. The rental firm, which counts Carillion, Balfour Beatty and DHL among its customers, has more than doubled its rentals in the past year from 4,000 to 8,500.
Whether it is a question of freeing up cash or problems obtaining funding to finance purchases, rental is a ‘no-brainer’, according to Northgate Vehicle Hire.
“Research undertaken in June suggests that 22.5% of our customers expect to use rental more over the next six months,” says Ross Clarkson, UK marketing director.
Flexibility is particularly important for those businesses with new employees who are on probation for three months or who have a relatively high turnover of staff.
In the probation period, rental can avoid the costly early termination charges associated with ending a contract hire agreement if an employee doesn’t work out.
It helps fleets avoid long-term financial commitments and early termination charges, as well as having depreciating assets on the balance sheet. And they can change the make-up of the fleet at any time.
Case study: McGinley Recruitment Services
McGinley Recruitment Services uses Reflex’s flexible rental product for its entire fleet of more than 300 vans.
Chris Dean, supply chain manager, believes that switching from contract hire to flexible rental has saved the company £500,000 over a three-year period.
“It’s given us the ability to swap and change our fleet,” said Dean. “It means we’re not carrying any dead wood. I could order 300 vans on contract hire and then four months later realise I need only 250, and I’d have to carry the 50 extra for the rest of the year.
"With flexible rental there’s no contract and there are no penalties if I send the vehicles back early.”
As the company’s vehicles are used around the clock, one of the benefits is that breakdown, ful maintenance and all relief vehicles are included in the monthly rate.