Fleet News

Improved profitability fuels leasing expectations

Business confidence is rising among leasing companies as profitability improves and growth expectations increase in response to stronger fleet customer demand.

Compared to the same period last year, 63% of leasing companies report improved profitability, compared to an average across the fleet supply market of 41%.

Future expectations are also ahead of the industry curve, with nearly half of leasing firms (48%) predicting that profitability will increase in the next three months, ahead of the industry average of 40%.

This predicted growth in profitability has clearly impacted on business confidence, with 53% of leasing companies saying they are more optimistic about their future prospects.

This is slightly behind the industry average of 61%, but this higher figure has been driven by a surge in confidence among manufacturers, which believe that demand for new vehicles is set to rise further this year.

Nearly two-thirds (60%) of leasing companies expect to see an increase in sales in the next three months, while 71% predict there will be an increase in customers. In response, 70% say they are currently recruiting.

Despite this positive outlook, companies will have to fight hard for growth in a competitive market.

Half of leasing companies interviewed identified intense competition as one of the three biggest challenges facing them in the next quarter.

The activities of manufacturer-owned leasing companies were of most concern, with one firm complaining of their ‘lunatic prices’, leading to the threat of unprofitable rentals to remain competitive.

Another key concern for leasing companies is choosing the right business strategy to cope with internal and external issues.

As leasing companies grow to cope with increased levels of business, strategic choices include changing premises, allocating limited resource among a growing number of projects, launching new workflow programmes and keeping critical IT systems up to date.

At the same time, companies are scouting for new routes to market, particularly low-risk opportunities and identifying new customers to maintain growth.

This introduces funding pressures as money has to be sourced to acquire vehicles for leasing. Executives say the funding market is still very disrupted and lenders are constantly changing their approach, which makes continuity difficult.

This also affects customers, as creditworthiness remains an issue in some sectors, adding new hurdles to the traditional challenges of retaining current customers and keeping new ones.

Maintaining and managing vehicle supply is set to become a growing issue in future as customer demand increases, leasing companies believe. 

One company said: “We need to try to educate customers who still believe there are fields full of unsold cars. This is no longer the case.”

Manufacturer plant closures have affected lead times and vehicle availability, so that long delivery schedules are becoming more common, firms say.

Growth is also raising staffing issues for many leasing companies as they recruit.

There are plenty of potential recruits, but the challenge is based around retaining and recruiting quality staff who can meet customer demands.
 


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