Around two-thirds (65%) of leasing companies have been under pressure from customers to renegotiate the terms of their agreements in the past 12 months, according to research from Creditsafe.
The main reasons for renegotiation, according to the 50 UK companies that were surveyed, were a desire to amend the length of the lease agreement, or extend the contract mileage.
The survey, which was conducted in April this year and included members of the FN50, also found that vehicle leasing firms have fallen victim to increasing incidences of late or defaulted payments in the past 12 months.
More than three-quarters (76%) have witnessed an increase in payment issues with almost a third (32%) of companies losing money in this period as a result of clients entering insolvency or declaring bankruptcy.
Leasing companies have been taking proactive steps to limit their exposure to client insolvencies, with all firms surveyed running credit checks on prospective and existing customers.
However, Creditsafe suggests they should increase the frequency of these checks. Increasing the stringency and frequency of customer credit checks and tracking their ongoing financial viability will help reduce losses incurred by customers becoming insolvent.
Chris Robertson, UK managing director of Creditsafe, said: “While the car leasing market remains buoyant, firms are still incurring avoidable losses.
"Customers’ financial circumstances can change very quickly and it is important leasing firms track the ongoing viability of customers to meet their financial obligations on a regular basis.
"Asset recovery can be a time consuming and expensive process, so it is often better to contact customers identified as ‘at risk’ proactively to address the situation.
“With many organisations struggling to justify the upfront capital outlay of vehicle fleet purchase and with access to financing still relatively tight, particularly in the small business sector, leasing offers an attractive alternative.
"As the economy picks up steam and demand rises further leasing operators will need to invest sufficient resource in credit risk management to try and drive down the unacceptably high levels of losses.”
- For advice on getting the terms and conditions of a contract hire agreement right read our feature here.