Fleet Leasing

Cash takers fuel PCH growth

Row of parked cars

Personal contract hire (PCH) is on the rise as major leasing companies are targeting businesses to offer their employees cheap deals.

Cash takers, spurred by uncertainty around future company car taxation, are among those on the radar.

A number of FN50 leasing companies are launching PCH services that, in some instances, offer cars with monthly repayments lower than the equivalent benefit-in-kind (BIK) tax.

“For a variety of reasons the traditional company car is going to change over the next couple of years,” said Nick Hardy, sales and marketing director at Ogilvie Fleet.

Hardy believes that the leasing industry has previously neglected drivers who take a cash option by not explaining the benefits of a company car and leaving them to find a vehicle in the retail market.

“The drivers are still drivers and still need transport. How they fund and use that transport to meet their personal needs is what is changing.

“Some drivers want to minimise cost, some want better cars, some want economical cars, others don’t. The need to offer more choice and match transport needs to lifestyles, while still meeting the corporate needs of employers, is the trick.”

He believes leasing companies have to work more closely with drivers to ensure they make the right decision to suit them financially, offering a range of solutions.

“It’s a minefield out there to find a PCH deal,” Hardy said.

“If a company trusts us with its fleet, why doesn’t it let us go further down the line with its employee base. The offers can be promoted internally as a HR benefit and we will provide the service to all employees who want it.”

Lex Autolease has offered PCH since 2012, but is currently piloting a new scheme with a number of its corporate customers who already have a company car scheme in place. The new Personal Contract Leasing (PCL) service is available to all employees and is structured to maximise discounts via affinity terms with selected manufacturers and special offers.

Unlike a salary sacrifice arrangement, in a PCH deal the vehicle is provided to the driver privately and is not classed as a benefit.

Ashley Barnett, head of consultancy at Lex Autolease, said: “It may be of particular interest to those considering opting out of their company car scheme and taking the cash alternative, with a view to leasing their own vehicle.”

Arval says it is seeing a shift in large companies’ attitudes towards keeping their employees mobile. It has started offering a new PCH product call Re-Lease, offering nearly new vehicles as a PCH product at a reduced rate. 

Paul Marchment, SME development manager at Arval, said: “For many years companies offered a traditional company car and then, in more recent times, some have offered their employees salary sacrifice products. 

“For larger companies who do offer a cash allowance to drivers, a PCH product is the next natural step. Ultimately a large organisation will require a joined-up package which it can offer to all employees which should encompass all these funding products as well as risk products such as driving licence checking and insurance.”

ALD Automotive already has several affinity and structured schemes in place and, following a successful pilot, is about to roll out a fully online solution to several customers later this year. 

It offers private individuals the ability to obtain quotes, be underwritten, place an order and sign an agreement electronically. It also offers an in-life tool for the ongoing management of the agreement – offering customers an end-to-end car buying journey entirely online.

“With the introduction of WLTP on new cars, coupled with the lack of clarity on BIK rates beyond 2020, there is a growing level of uncertainty around company cars. Some drivers, particularly those in perk cars with a cash alternative rather than the essential users, are considering their options,” said Mark Evans, fleet consultant for ALD Automotive.

But, Evans also predicts a shift in the private market: “PCH is particularly popular with younger people who are more detached from the emotional side of ownership and would rather have the latest model, whether that is a car or a mobile phone.  With PCH, drivers have embraced the idea of having a brand new car every few years, possibly upgrading to something that they wouldn’t normally be able to afford to buy, particularly if the cost is fixed and budgeted, taking away the financial risk.”

Zenith launched Zen Auto in March, with a focus on offering PCH deals to the public. The company expects the consumer market, currently 80% Personal Contract Plan (PCP) and 20% PCH, to flip in favour of PCH within the next 10 years, as millennials – with no equity – drive a new subscription economy.

Tim Buchan, chief executive of Zenith, said: “Zen Auto is designed to make it easy for drivers to find and fund their next vehicle. We think that this, along with an increasing trend in society to borrow or rent things rather than own them, and the compelling value that leasing offers for many drivers makes for a significant opportunity to grow PCH’s share of the market.”

According to the British Vehicle Rental and Leasing Association (BVRLA), the trade body for the vehicle rental and leasing sector, personal leasing grew by 14% in the first quarter of 2018, contrasting with a 1% overall decline in the leasing sector.

Mirroring this growth, all the FN50 top 10 leasing companies now offer some type of PCH arrangement.

Tusker, occupying 13th position in the league table, told Fleet News they have also launched a PCH product and see it as primarily supporting salary sacrifice car schemes

Venson Automotive Solutions (20th) confirmed it has no immediate plans to enter the PCH space.

However, Inchape Fleet Solutions (IFS), 14th in the FN50, is the latest company to announce a personal leasing division, called Leasemycar.

Matthew Rumble, managing director at IFS, said: “This product launch marks an important step in our strategy to widen our product portfolio to ensure sustainable growth. We have listened to the voice of our customers and developed this product to enable wider access to the benefits already enjoyed via business contract hire.”

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