Fleet News

No funding issues as Marshall Leasing boss targets growth

“Last year was a better year than we expected.” It’s not a statement many companies would utter, given the severity of the recession that enveloped the UK.

That it came from a company in the leasing sector, which has faced a tough 12 months as fleets held off from making purchases due to economic uncertainty, threats of staff redundancies and issues over access to funding, is all the more surprising.

However, Peter Cakebread, managing director of Marshall Leasing, has seen it all before during a 29-year career in the sector – he’s become used to making cautious predictions during downturns.

After the doldrums of 2008, when the now infamous residuals collapse threatened the very survival of some leasing providers, Cakebread was budgeting for a poor 2009.

“Then there was a significant recovery in the used car market,” he says. “Residual values didn’t get back to their pre-2008 levels, but they got close and they have been sustained throughout the year.”

It’s no exaggeration to say that the residuals revival was a saviour for some leasing companies.

They have continued to face a tough time on sales, but at least the losses suffered at auction have been shored up.

“The used car market has recovered enough to get people off the hook. If it had continued there would’ve been a lot of consolidation,” Cakebread says.

Marshall Leasing’s own experience was a poor first half of 2009 as extensions removed sales and fleets downsized.

“There was a collective holding of breath by buyers with every company asking themselves whether they should commit to long-term contracts.

“But we did see evidence of a recovery in the second half of the year. Companies were back buying on a more regular basis,” says Cakebread.

One noticeable development is the prevalence of companies re-examining their supplier contracts as they look to control costs.

With many fleets forecasting costs to rise with higher fuel and new car prices (Fleet News, January 21), action is being taken to mitigate overheads.

But it’s not all about getting a better deal on prices – diminishing service levels are also to blame, according to Cakebread.

“Some leasing companies reacted to 2008 by chopping out staff and that has reduced service levels,”he says.

“There’s also evidence of offsetting disposal losses by being more stringent on end of contract recharge levels. It’s the wrong thing to do; customers can see what’s going on.”

Marshall Leasing did neither of those things.

That it stuck to its guns appears to have paid dividends – it was one of the few FN50 companies to record a rise in its funded fleet in 2009, by 7%.

Ownership by one of the UK’s most cash-rich franchised dealer groups certainly played a role.


The family-owned Marshall Group is renowned for its cautious approach to risk. It’s often been criticised in the past by analysts but such prudence is now hailed as a strategic masterstroke.

“They have very little borrowing so we have been able to access funds at reasonable levels,” he says.

Cakebread is looking ahead to 2010 with “cautious optimism”. Contract extensions have reached the point of churn, with few companies willing to go beyond four years. Of Marshall’s own 200 or so fleet customers, “10-15%” have extended from three to four years.

“There will be an injection of demand in the marketplace, although this could be offset by reduction in fleet sizes or a rise in default levels.”

Unlike many leasing providers, Marshall doesn’t use agencies; it takes all the credit risk which makes rising default levels a real threat.

“I don’t think companies or the public fully understands the implications of the Government spending £700 billion,” Cakebread says. “It will mean a huge reduction in public spending and huge unemployment in that sector.”

Looking further ahead gives cause for greater cheer. The drop in new car sales in 2008 and 2009 to below two million – likely to be repeated this year - will result in a shortage of used cars in three years’ time. Come 2012, with the UK firmly out of recession, demand will outstrip supply, forcing prices up.

“The industry has been cautious on writing business based on residual values, but with values rising last year, not many are being cautious today,” Cakebread says.

He is targeting growth of 5-10% in 2010 by setting out Marshall’s proposition as a provider of a flexible, personal contract hire service.

This sits best with companies managing 25-500 vehicles, largely in the private sector, although Marshall Leasing has done well in the charity sector. Charities share Marshall’s values as a family-owned business.

New products are also under consideration. He describes salary sacrifice as “very interesting: It’s not expensive funding and many fleets that purchased vehicles or got funding independently are considering it with the changes in the credit environment”.

The business model centres on organic growth by winning new contracts, although Marshall isn’t averse to dipping into the acquisition pot. It bought Gates in 2006, which added 600 vehicles to the fleet.

“We have examined acquisitions, but it only makes sense if there is longevity – a customer base that we can sustain,” Cakebread says.

“There’s no point buying if we can’t service those customers.”


Marshall exploits dealer discounts

 Marshall Leasing buys the vast majority of its cars internally and disposes of an increasingly high proportion through the group’s 36 dealerships.

The retailer’s broadening focus on used cars – similar to other franchised dealers – has seen it target older used cars as much as nearly-new.

That makes it a better route to market for the leasing operation’s four-year-old vehicles.

“We have developed synergies in the last 18 months, such as on used cars,” says Peter Cakebread.

“We are also looking for a closer relationship with the corporate sales team that is being developed for the wider group.”

Ownership by the notoriously cautious retail group has a string of benefits, not least financial stability and continuous access to funding during the difficult economic downturn.

However, each ownership model presents its own challenges, claims Cakebread.

“Independents sit on their own strength; bank-owned have the turmoil of the market; manufacturers have had issues with leasing companies,” he says.

“There are difficulties no matter which model you are – but we’ve largely escaped.”

Internal expertise is still necessary

Now is the ideal time for fleets to reassess their supplier relationships, according to Peter Cakebread.

However, he warns against outsourcing the fleet management operation without retaining an in-house specialist.

“You have to ensure value for money from your suppliers,” he says.

“But it’s not helped by companies fully outsourcing and removing the fleet function. You need the internal expertise to deal with the complexity and cost within the business.”

Cakebread is also troubled by the trend for companies to use internal or external procurement managers to handle the tender process.

“They are buying something that involves their personnel receiving a service so the elements of that service are important.”

Leave a comment for your chance to win £20 of John Lewis vouchers.

Every issue of Fleet News the editor picks his favourite comment from the past two weeks – get involved for your chance to appear in print and win!

Login to comment


No comments have been made yet.

Compare costs of your company cars

Looking to acquire new vehicles? Check how much they'll cost to run with our Car Running Cost calculator.

What is your BIK car tax liability?

The Fleet News car tax calculator lets you work out tax costs for both employer and employee