16th February 2018

Exciting ‘new’ mobility products opening up for fleet managers

Over the last half a dozen years in particular, the UK has seen vehicle leasing or ‘contract hire’ proliferate among not just business customers but also private motorists. Q3 2017 ended with the BVRLA citing 2.5% growth in leasing across business fleets, while the entire market grew 6%, contributed to by a whopping 28% surge in personal contract hire (PCH1). Meanwhile, the SMMT2 totted up fleet registrations to have accounted for 55% of the UK vehicle sector during 2017.

Business contract hire has traditionally meant that leased car and van drivers have been able to enjoy the benefits associated with brand new vehicles. Constant advancements and refinements result in improved efficiency and fuel economy, reduced CO2 emissions, increased safety standards through the likes of advanced driver assistance systems (ADAS), and enhanced infotainment functionality including connected services. With leasing always associated with newly-registered cars or vans, fleet managers could rest assured that their at-work drivers were protected by the latest standards while the vehicles under their duties of care were operating as economically as possible.

The contract hire market is serviced by a huge number of brokers, but it’s ultimately a handful of core funders who actually purchase the cars and vans in question. Many of them are backed by large banks, such as Lex Autolease, which is part of Lloyds Banking Group.

At this exciting time of revolution in the world of mobility, leasing’s core funders are beginning to make some announcements that will prove very interesting for early-adopter fleet managers.

Firstly, the world’s largest leasing firm, LeasePlan, has unveiled strategies for embracing the society’s supposedly imminent shift from vehicle ownership to usership.

“Increasingly, our customers – whether they are corporate, SMEs or private individuals – would prefer a ‘Car-as-a-Service’ with no strings attached in terms of car type or duration. They just want ‘any car, anytime, anywhere’”, LeasePlan’s CEO Tex Gunning told FleetNews3. The firm’s new CarNext.com platform will enable customers to buy, lease or even subscribe to used vehicles, disrupting both B2B and B2C digital automotive channels.

Arval, backed by BNP Paribas, is also determined to boost interest in used vehicle leasing, which is a product that has been available from a variety of sources for a few years but hasn’t seen much takeup. Arval’s used vehicle leasing vision makes resounding sense at a time when some fleet managers and businesses in general may be tightening their purse-strings due to caution over Brexit, potential interest rate rises and other factors.

Shaun Sadlier, head of Arval’s respected Corporate Vehicle Observatory Barometer, highlighted in a recent interview how higher standards in vehicle durability mean that properly maintained cars and vans are now almost indistinguishable from brand new counterparts in this day and age4.

Monthly rentals have crept upwards over the last couple of years, precluding newer and smaller businesses in particular from being able to access the benefits of contract hire, but Arval envisages leasing prices for used vehicles to be around 30% lower than equivalent new models. Additionally, the surging popularity of short-term PCH deals means that an array of one or two-year-old, high-specification cars regularly appears on the market – perfect for businesses with more modest budgets.

It’s fair to argue on the downside that large organisations may steer clear of used vehicle leasing primarily because enabling their staff to customise brand new cars in the exact colours and trims they desire has become a major lure in HR departments’ recruitment methodologies.

For sole traders through to SMEs, though, used car leasing sounds a much less risky bet than trying their luck at one of the UK’s ex-fleet vehicle auctions.

It’s also encouraging to see lease funders embracing Mobility-as-a-Service and exploring vehicle usership rather than ownership or conventional contract hire at this time when especially millennials, the business leaders of today and tomorrow, perceive sharing very much as caring.

 

Sources:
1. https://www.bvrla.co.uk/sites/default/files/documents/research/bvrla-q3_2017_highres.pdf
2. https://www.fleetnews.co.uk/news/fleet-industry-news/2018/01/05/diesel-new-car-registrations-down-and-fleet-registrations-fall-in-2017
3. https://www.fleetnews.co.uk/fleet-leasing/news/latest-fleet-leasing/2018/02/13/leaseplan-targets-subscription-model-for-new-and-used-cars-as-profits-rise
4. https://www.fleetnews.co.uk/blog/is-it-time-to-consider-used-car-leasing