Fleet News

Funding: Suppliers - do your homework to get the best leasing contract

Companies looking to contract hire their fleet of vehicles need to do their homework before signing on the dotted line, as the wrong choice could cost them thousands of pounds.

While all contract hire companies are operating in a free market economy, the difference in monthly rates they charge can be huge – Fleet News research has found a difference of £42 a month on the rate of a Ford Fiesta.

This becomes even more surprising when you consider that the vehicle in question can cost from as little as £235 a month on a contract hire deal.

The reason for the differences is down to a number of factors. Firstly, the contract hire companies all have different deals with the car manufacturers – generally, the ones buying in the biggest bulk will secure the largest discounts.

Each of the contract hire companies will also set varying residual value forecasts for each model.

These figures are based on data from the price guides but also from their own experience of defleeting the vehicles, and its own market analysis.

According to research from fleet consultancy Fleet Operations, this residual value difference can be up to £3,000 on identical models from different companies.

And just as private individuals have varying interest levels on their savings and mortgage repayment rates, so do the contract hire companies.

Fleet Operations’s research has found that interest rates being paid by leasing companies to finance their vehicle fleets vary dramatically – from under 4% to more than 8% – and this has a knock-on impact on the leasing rate.

The consultancy’s managing director, Ross Jackson, says: “The Bank of England might have set an all-time low interest rate of 0.5%, but such rates are not being reflected in monthly rentals.”

Factor in differing SMR (servicing, maintenance and repair) costs, and varying profit margins built-in to the deals by the leasing companies, and the potential disparity in monthly rentals for the same vehicle is huge.

And human error can also play a part, with mistakes almost inevitable when processing tens of thousands of vehicles – CAP data shows there are 6,436 separate new cars for sale, and this excludes the added complexity of optional extras.

Jackson adds: “This should act as a wake-up call to fleets, which must conduct a thorough due diligence review of their leasing suppliers and examine exactly what numbers are included in each calculation.

“We continuously track the market on behalf of our customers, but there is much apathy about doing so from many fleets.

“A monthly contract hire rate from a leasing company should not simply be accepted at face value.”

See if you can find a great price for your business and compare contract hire with fleet news today.

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Comments

  • LINGsCARS.com - 29/06/2010 14:19

    Oh, yet another "NEWS" item linking to these Fleet News contract hire offers. This is outrageous, pretending this is a news item. Be honest SB and tell people this is an advert for a service Fleet News get a backhander on! Absolutely wrong to trick visitors like this. This is a SPONSORED SERVICE for money for Fleet News/Bauer. Declare it, don't hide it. - Ling

  • gychris - 08/07/2010 12:29

    How can you expect Fleet News to retain its credibility when the article above, whilst purporting to be editorial is actually a thinly veiled effort at pointing readers to you commercial partners, so it can earn you and them money, lets not mess about, it’s a sales pitch! Once the genie is out of the bottle, there is no way of putting it back and once your editorial independence has gone, your publication loses its open honest and unbiased approach and readers and contributors will distrust you and the credibility and honesty of your editorial and of what you say. Come on guys, where is your self respect as journalists? What ever you’re cut out of this, surely it can’t be enough to throw your principals out of the window……can it? Well, seems at this point it can. Perhaps this is just the tip of the iceberg, but I hope not, as Fleet News has been the one voice, the one publication, that fleet operators could trust, a publication they felt part of and able to contribute to, knowing the journalism adhered to the highest moral standards but at the moment, trying to hide a sales pitch in a piece of independent editorial throws all of that out of the window and your crown is slipping and you need to be very very careful it does not fall off all together.

  • spade - 26/07/2010 10:04

    Although I have some sympathy with the couple of comments already made on this article, my major concern is that FN, I thought understand the fact that contract hire is or should be a comprehensive service offering NOT a commodity to be unbundled by so called fleet experts such as Ross Jackson or other fellow charlatans. While Mr Jackson and other self proclaimed experts pedal their "consultancy" which is nothing more than a blunt price comparison instrument it is the contract hire and leasing companies that allow their intervention which simply staggers me. Why would you allow someone to hack your rates and margin while not having any interest in your service delivery is beyond me. Only last week I rejected an opportunity to tender for a major UK fleet as the tender submissions were to be sent to another one of the so called fleet expert intermediaries. When reading the website of this intermediary organisation they proudly state that they unbundle service delivery from contract hire companies to minimise price and control the margins of the contract hire and leasing company. Two final comments on this : Why would any contract hire company in their right mind participate in this tender. And, What is the end user company thinking about allowing such an important part of their compensation and benefits offering being reduced to a basic commodity.

  • Aquilan - 27/07/2010 09:12

    It seems Fleet News are looking to diversify from their core business function. Personally, I don't see what the fuss is about, or why they should be slated for it... They are a business like any other and don't run on fresh air. If these contract hire offers lead to savings for a customer - What is the harm? No one is being forced to use the service and this could be extremely useful for some fleet operators. I don't recall Fleet News purporting a monopoly on morality and I would be interested to know how many of you feel that strongly, you feel the need to cancel you FREE copy of Fleet News magazine or refrain from attending FREE workshops or events, CCIA etc.

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