Fleet News

Fleets expect rental price hike

Fleets are expecting a rental price hike in the coming months after several suppliers hit financial difficulties at the end of 2010.

Leaseway and NVR went into administration, with the latter bought by Hitachi Capital Vehicle Solutions, and TLS closed.

The high-profile failures have caused uncertainty in the market and left four out of five fleets (80%) expecting car and van short-term rental rates to rise next year, according to a Fleet News poll.

One respondent to the Fleet News poll said: “Price rises are probably inevitable anyway in the current economic climate, but recent failures only make it more certain as suppliers look to protect their position in the marketplace.”

Another, simply said: “God help us.”

Van rental giant Northgate has announced it anticipates a rise in rental prices this year. It has already seen average hire revenue per vehicle rise by 2% in 2010 as it posted a 30% increase in group operating profit to £53.5 million for the six months to October 31 (Fleet News, December 14, 2010).

John Lewis, chief executive of the BVRLA, said it had been a “tumultuous” end to 2010, with a number of companies being taken over, exiting the market or going into administration.

“While regrettable, these events have shown that some smaller operators who have relied on a simplified, cost-based product offering have struggled to compete with larger operators who have greater economies of scale and the ability to invest in value-added services such as fleet management,” added Lewis.

“Our members forecast a continuing growth in demand for commercial vehicle rental and leasing in 2011, particularly for vans.”

But that may now come at a price after independent contract hire and rental consultant Mark Brooker highlighted how daily rental companies had been striking corporate deals at “crazy prices” to grow their market share.

“Rental companies that are fortunate enough to get a healthy proportion of retail rental business can balance their respective portfolios and hopefully break-even or make a marginal profit,” he explained.

“Those that depend more heavily on corporate business may claim to have a larger market share, but will almost certainly struggle to make any profit at all.”

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