Fleet News

Pricing war could have a high cost for rental companies

Rental companies have been accused of partaking in “suicidal pricing strategies”, by an independent contract hire and rental consultant.

Mark Brooker, who has worked for major contract hire and rental companies, told Fleet News: “Major Corporate deals are still being struck at crazy prices as the major rental companies battle it out for an increased share of the market, almost at any cost.”

His comments come in the wake of Newtown Vehicle Rentals and Leaseway Vehicle Rental entering administration.

Leaseway operates one of the UK’s largest privately owned LCV fleet hire businesses from sites in Glasgow, Newcastle, Leeds, Manchester, Birmingham and London.

Established in 2003, the company currently runs a fleet of around 13,000 vehicles and employs 255 people.
Bruce Cartwright, joint administrator and head of business recovery services at PricewaterhouseCoopers in Scotland, said: “During the last 12 months, Leaseway has encountered trading difficulties that has made it difficult for the company to service its existing financial obligations.”

The company’s directors had considered various options to deliver a restructuring solution that would provide a long term viable business, but unfortunately that failed.

“Our immediate priority is to continue trading the business, ensuring that commitments to contracted customers are met,” added Cartwright.
Meanwhile, PwC is seeking a buyer for some or all parts of the business.

“Companies have often been able to survive based on profits achieved via the resale of vehicles, but those days have gone for the time being and inevitable losses on disposal have only made the situation worse,” said Brooker. 

“Some rental companies have been fortunate enough to fund the majority of their fleets historically via back to back agreements with the manufacturers, thus getting away from any disposal risk or reward.  Those days too are slipping away as the manufacturers seek to avoid ‘carrying the can’ for the rental companies.” 

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Comments

  • TonyDonnelly1 - 11/12/2010 12:31

    Mark Brooker is partly correct - but has omitted to take into account the part played by Fleet management/Leasing companies in the 'Price-War'. Rental deals are bundled together with the leasing proposition to ensure the major contributor (contract hire) business is retained at all costs. The knock-on effect being the rental company is forced to adopt an unprofitable deal on the basis it will all come good in the 'mix'. It never does. Rental is the sacrificial cow and has to be mature enough to stand up and say so. The companies unfortunate to suffer the fate they have should take note of the process adopted by the bigger players - profile the rental component separately - do not be sucked in by the 'total spend' figure - which usually includes fuel, damage etc - concentrate on the rental spend and avoid the 'happy-talk'. Rental is now an integral part of a progressive fleet policy and not the distress purchase it once was - evidenced by the reducing rental fleets around the country and across the EU in recent times. Time for a reality check.... Tony Donnelly

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