The credit crunch and subsequent recession has forced bank-owned leasing companies to take a different approach to lending, according to the boss of one major provider.
Andrew Cope, chief executive of Zenith, claims they are returning to “classic” lending, which requires more checks on companies and less availability of cheap finance.
“They will have to reassess who they are lending to, what their credit is and what return they will take,” he said. “It needs a different approach focusing on capital versus risk and the return on business – the lower the risk, the better the return.”
The industry is going through a state of flux following the credit crunch and Cope expects more businesses to consider switching their policies, removing cash allowance and bringing staff into the company car scheme.
“Cost of cash has increased while the cost of the car has fallen,” he said. “But once you have given a cash allowance, it’s hard to retract.”
He predicts a changing of the guard in terms of the contact hire companies which control the FN50, suggesting that some of the dealer-owned leasing companies could become dominant players.
“The UK banks will not be dominant in this market from a delivery perspective. They will still provide most of the funding, but it will be a different model,” Cope said.
One possibility is for banks to start using third party providers to manage the fleet customers while they still fund the vehicles. They might also lend into the wholesale market more frequently, sometimes in preference to using their own contract hire operation.
Zenith is planning steady growth this year, setting its targets at 20,000 risk vehicles (up from 19,500) and 10,000 fleet management (up from 6,500).
Salary sacrifice and sale and leaseback deals both offer “huge potential”, Cope said.
He dismisses critics’ claims that the Government will step in if salary sacrifice takes off.
“It’s in the Government’s interest – they want the churn of cars and a vibrant market,” he said. “Salary sacrifice is a force for change to deliver more efficient cars to more people. And that’s a good a thing.”
And he agrees with the recent Lex Autolease survey which suggested that 27% of finance directors were considering switching from outright purchase to sale and leaseback.
“Credit has gone from plentiful and cheap to restricted and expensive,” he said.
“Cashflow and capital will lead to more sale and leaseback deals – probably in the hundred of businesses. It gives accelerated growth for the contract hire company because it gives four years of growth in one go."
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