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Toyota Financial Services: moving into multi-brand funding

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Leasing experts believe that manufacturer-owned contract hire companies will accelerate their penetration into the UK fleet market over the next two-to-three years.

Evidence comes from BMW-owned Alphabet’s acquisition of ING’s leasing division last year while Mercedes-Benz Financial Services is about to go multi-marque in a deal with Leasedrive.

Now Toyota Financial Services (TFS) has paved the way for a rapid expansion of its risk fleet with the development of a multi-brand funding product.

The company, which is 25th in the 2012 FN50 with a risk fleet of 6,316 vehicles, currently provides funding only for Toyota and Lexus models.

However, the launch of Multi-Marque will enable it to widen its range of potential customers, says TFS managing director Doug Gillies.

“We have a product which we will be launching over the coming months which will enable us to offer a multi-brand funding solution,” he says.

Being able to provide funding only for Toyota and Lexus models had been a “barrier” to winning business, adds Gillies: “Now we can turn around and offer funding for vehicles from other manufacturers.

“In an ideal world all of our corporate customers would have a 100% Toyota and Lexus fleet. However, in the real world, we know this isn’t possible.”

Traditionally, TFS’s main fleet customers have been small and medium-sized businesses.

It made a decision not to target larger blue chip companies because they typically wanted one contract hire company to provide funding for all of the various brands on the fleet, something TFS couldn’t offer at the time.

However, under Multi-Marque, TFS will be able to offer funding for a multi-brand fleet, provided the business is competitive and it leases at least one Toyota or Lexus vehicle.

Also on the horizon for TFS is a new contract hire product which will have additional features and offer a more mainstream solution for fleets.

TFS points out that contract hire is not the only funding solution available to fleets and for funders to be successful, offering a diverse range of options is key.

“We don’t just see fleet as contract hire,” says Mike Fisher, general manager, Lexus, fleet and national accounts. “We do a lot of PCP programmes which are a very good way for businesses to purchase cars. It is difficult to put a number on our total business risk fleet but we do see fleet as not just a contract hire product but through purchasing as well.”

Gillies adds: “It’s about providing a solution for business users. Some will want to finance it, some won’t want the residual risk and some might just want fleet management.”

In the UK,  20% of all Toyota’s sales are now funded through Toyota Financial Services. The manufacturer aims to raise this to 35% by 2015, with fleets a major driver of growth.

Historically the split of customers using TFS has been 65/35 in favour of retail.

Last year Toyota sold 84,571 vehicles, 33,465 of which were to fleet customers for a market share of 3.3%.

TFS’s mission statement is to have a ‘customer for life’ and it is looking to improve the dealership experience.

Fisher says that historically it has been inconsistent and fragmented. “Our challenge is making the dealer network focused, motivated and skilled to enable them to speak to business users,” he says. “Our total cost of ownership is a strong message so we think it is important for the dealers to be able to answer any queries the customer has and bring forward this message to them to help us win new business.”

Most of TFS’s business starts at one of the 80 business centres Toyota has in the UK. SME business is managed within the dealerships, while larger business opportunities are picked up by the field team.

The average length of a TFS contract is 28 months, and dealerships contact customers when there is a third of the contract left to run with a view to retaining their business.

“It’s not only about the deal you do today, it’s about renewing the contract in two to three years’ time,” says Fisher.

He adds that TFS hasn’t needed to toughen customer funding during the recession as the company’s good credit rating means it has access to highly-competitive rates.

Another factor helping to drive business is the fact that banks have less of an appetite for funding business loans.

TFS commits to retaining the residual values set at the launch of a new model for the first six to nine months to give continuity and customer confidence. But it believes the pricing guides understate the impact of its five-year warranty.

Gillies and Fisher both sit on a residual value committee which meets regularly to review the products, debate particular values and benchmark against the industry.

“Our residual value process has become far more sophisticated because of the data that is now available,” says Gillies.

“The whole process is based on the best market and product information. We have a pretty good idea of how our three-year-old product is going to do today.”

Price is also an important part of being successful, Gillies admits that it all comes down to the competitiveness of the marketplace and a one price rule doesn’t always fit.

“We price for the opportunity, you have to be very competitive to be successful in the marketplace. You have to have the right offering in place to win new business,” he says.

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  • Richard Beadle - 15/07/2013 13:15

    how do we contact TFS regarding this?

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