Fleet Leasing

Venson says ‘golden hello’ to win fleet leasing business is a false economy

leasing bungs, leasing cash incentive.

Leasing and fleet management companies are regularly paying organisations a ‘signing on fee’ to win business, according to Venson Automotive Solutions.

Known as a ‘golden hello’, securing a signing on fee may feel like a good deal for procurement teams, but Venson is warning that nothing comes for free and any short-term savings - or gains - are likely to be recouped by the provider over the lifetime of the contract.

Samantha Roff, managing director of Venson, said: “Procurement departments regularly speak of ‘locking down’ a contract, however, there is very little that is ‘fixed’ in a vehicle leasing contract.” 

She argues that a price presented in a tender is based on a specific moment in time and doesn’t take into account future price rises. 

“There will be many legitimate reasons that vehicle leasing and fleet management companies can apply price changes,” she said. “These include manufacturers introducing price rises, residual values reducing, changing interest rates and the cost of funding varying. 

“In addition, there will be changes in service, maintenance and repair costs, as well as the likelihood of discount terms the leasing companies receive from manufacturers altering. 

“Crucially all these factors contribute to a monthly lease rate, resulting in what is known as ‘rate creep’, when the monthly rental costs gradually increase.” 

Over the life of a three or four year contract, the supplier can recoup the cost of any signing on fee. “Consequently, the reality is that it is virtually impossible to challenge those vehicle leasing providers, who softened a contract signing with a ‘golden hello’, on how they set monthly contract hire rates,” said Roff.

“Fundamentally, fleet vehicle procurement is completely different to businesses procuring other goods or services.

“It is virtually impossible to think of another product or service that will be acquired by an organisation, the price for which will likely change on a daily basis due to their being so many variables.” 

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!

Comment as guest


Login  /  Register

Comments

  • Brian Moss - 24/04/2018 17:01

    In my 25 yrs running a fleet leasing company (now retired) we never used any of those so called add ons to a contract. The Contract was the contract and the only variable was the mileage any additional costs being agreed with the user otherwise the term and costs were fixed for the period The secret is to establish the funding,maintenance costs and projected residual values at the outset

    Reply as guest

    Login  /  Register
  • Brian Moss - 24/04/2018 17:03

    In my 25 yrs running a fleet leasing company (now retired) we never used any of those so called add ons to a contract. The Contract was the contract and the only variable was the mileage any additional costs being agreed with the user otherwise the term and costs were fixed for the period The secret is to establish the funding,maintenance costs and projected residual values at the outset

    Reply as guest

    Login  /  Register
  • Chris - 25/04/2018 11:34

    Brian, I think the point is that whilst your initial rates will be known, your renewals in 12 months for example will not be. If you commit to sole supply for 3 years, then these costs will just be passed on one way or the other. . . . perhaps an argument for dual supply, or perhaps self regulating as losing a customer after 1 round of renewals probably isn't overly appealing to the Leasing Co.!

    Reply as guest

    Login  /  Register