Companies operating in industries where there is traditionally high churn, those taking on people to do project work and organisations wanting to give employees on probation a vehicle before their position is confirmed (or isn’t) need a lease that fulfils a short-term requirement: enter the mini- or medium-term lease.

Mini-leases typically allow a vehicle to be hired from 28 days to a year (although longer hire periods are possible) and can cost 20% to 50% less than a daily rental vehicle.

Rental companies, such as Enterprise Rent-a-Car with its Month or More product, and specialist providers have traditionally offered mid-term rental, but more and more contract hire and leasing companies are adding it to their services to meet growing demand.

In January this year, Arval launched its mid-term rental product, which leases vehicles from one to 24 months and acts as a bridge between short-term rental (one day to one month) and contract hire (from 24 months).

In four months, it has grown to more than 100 customers operating more than 400 vehicles. “Customers know they will receive quality, well maintained vehicles,” says Gary Burns, Arval head of mid-term rental. “Car emissions are always sub-130g/km, they have high specification and good fuel consumption. They are fitted as standard with Bluetooth, rear parking sensors and the majority have sat-navs.”

The fleet ranges from supermini to premium executive, plus vans. Customers choose the category, Arval chooses the rest.

Burns says mid-term rental shows savings of at least 20% over short-term rental. Some providers report a 15% to 20% growth in demand over the past year. Demand is partly being driven by economic uncertainty with some companies choosing a mini-lease rather than being tied into a contract hire agreement.

“Although confidence is on the up, some businesses remain cautious about committing to a three- or four-year contract hire agreement,” says Ian Drayton, senior manager in car and van rental at Lex Autolease. “This has led to greater demand for mini-lease vehicles for companies across a range of sectors. We have around 3,000 of these on hire every day and this is growing.”

On the flipside, businesses that are performing well and winning new contracts are also turning to mini-leases.

Oliver Boots, head of product services at LeasePlan, says: “Demand is growing and we are being tasked to respond more and more quickly because customers are winning bigger contracts and need to mobilise more people quickly.”

He points out that with a mini-lease an employee can be on the road in a few days, they do not have to wait for manufacturers’ lead times.

Lex Autolease says that it can provide vehicles with guaranteed low mileage, petrol or diesel engine within five working days or sooner if fuel type is not a priority.

“Opting to rent cars and vans on a mini-lease basis is a simple and convenient solution to seasonal business changes such as Christmas and bank holidays, and also medium-term changes to the size of a business’s work force,” says Drayton.

Public sector fleets also find mini-leases useful. Alphabet points out that public sector bodies are often under annual budgetary restrictions that do not allow them to commit to a traditional contract hire.

Savings over using daily rental

One public sector organisation, which had high rental demand at five of its sites, has saved £20,000 by switching from daily rental to mid-term rental.

“It was placing rentals for anywhere between one day and three months and, on average, 140 rentals per month,” says Caroline Gallagher, sales director at Thrifty.

The organisation has now taken 60 FlexiFleet vehicles from Thrifty, and these are managed by a branch close to the sites.

“This has reduced their yearly spend by some £20,000 and the FlexiFleet product allows the customer to review and manage their expenditure more effectively,” Gallagher says.

Cars on Demand, whose mini-leases run from 28 days to three months, claims that its mini-leases cost up to 50% less than daily hire and are “not massively different from normal contract hire”.

Paul Brown, managing director of Cars on Demand, says: “A medium-sized Golf, Focus or Astra on a typical three-year contract without maintenance would cost £340 per month and a car in the same category on a mini-lease would cost £380 per month and that includes maintenance.”

The company has seen more than 20% growth in demand in the past year.

“It was a niche product but it is becoming a part of the mix,” Brown says.

Fleet management company CLM suggests that a Volkswagen Golf could cost £14.95 a day for three months (total cost: £1,345 annual or £450 per month), including the cost of the road fund licence and vehicle delivery and collection.

“Mini-leases provide the perfect answer to a company’s interim mobility needs and we have seen 15% growth in demand in the past year,” says rental manager Paul Nagra.

Try before you buy

In some instances, companies are using mini-leases as means of trying vehicles before committing to a lease.

“It’s great from a ‘try before you buy’ perspective, allowing a business or driver to assess the practicalities of a vehicle before committing to order,” says Arval’s Burns. “We are exploring the potential to make electric vehicles available as part of our product for exactly this purpose.”

Alphabet already makes the Nissan Leaf, BMW i3 and Vauxhall Ampera available to its customers under mini-lease.

“Customers are renting to try an electric vehicle before committing to a three- or four-year lease and that has been very successful,” says Kit Wisdom, head of corporate mobility at Alphabet. Alphabet partners with EDF to provide a portable or temporary charging solution.

Fleets operators also find mini-leases useful as an interim measure when they are changing leasing company and need cars but do not want to order more vehicles from the outgoing supplier.

Fleet managers are positive about this use of mini-lease. InterContinental Hotels Group recently used mini-leases when it switched to Arval.

“The Mid Term Rental product has certainly made my life easier while we transition our fleet over to Arval,” says fleet co-ordinator Julie Horsley.

“It’s like having a regular lease car with no lead time or penalties. The cars delivered been have high spec and give a more professional image than a standard rental car. I would definitely recommend this service.”

What’s the catch?

There is no industry standard for the length of a mini-lease.

Cars on Demand, for instance, offers 28 days to three months while LeasePlan’s FlexiPlan can be taken for between three and 24 months.

Customers take what is available in the bracket they want with FlexiPlan but if they have a longer commitment such as six to 12 months, Boots says “we might be able to source a specific vehicle or purchase one for it”.

Prices go down as the length of contract goes up and if a company takes a six-month contract and has to hand it back after four months, the rate reverts to the higher, shorter-term tariff, “which is not a significant penalty, compared to contract hire”, says Boots.

Both CLM and Zenith’s mini-leases start at 28 days, while Alphabet’s starts at 30 days upwards and Lex Autolease’s starts at 45 days.

The main downside with mini-leases, like daily rental, is there are mileage restrictions – typically around 2,000 miles a month. Exceed the mileage, and penalties range from a nugatory 9p to a punishing 50p per mile.

Thrifty FlexiFleet vehicles, for example, are available from 28 days to three months, with a mileage cap of 2,200 miles per 28 days and a charge of between 12p and 50p per mile for exceeding the mileage cap.

Lex Autolease has a mileage allowance of 2,800 miles every 28 days. CLM’s mini-leases last from 28 days to three, six or 12 months on new vehicles with a negotiable monthly mileage cap and a penalty for exceeding that of up to 25p per mile depending on what type of car.

It is worth checking whether the provider charges early termination fees.

Cars on Demand’s mini-lease does not have a penalty but its fixed short-term option for six to 24 months does, for instance.

Also find out whether the provider is likely to change the vehicle after a number of months.

Kit Wisdom, head of corporate mobility at Alphabet, says: “We will not switch them out of one vehicle and into another after three or four months.

“We generally keep customers in the vehicle for the life of the lease.”

Enterprise Rent-A-Car says that it will not switch any car for at least six months with its Month or More product.

Companies that need a car for more than a year may find that contract hire is a cheaper option.

REL Field Marketing has moved away from mini leases in favour of contract hire (see Fleet News, May 14). 

Procurement manager David Millar estimates a saving of £175 per month on contract hire versus a 90-day-plus mid-term hire arrangement – giving a saving of £4,200 over a 24-month period.

However, Gamestec (fleetnews.co.uk, April 20) has all of its 90 commercial vehicles on flexi-lease arrangements over three to four years rather than using contract hire.

“We have always used flexible rental suppliers, purely because of the rate we get,” says Peter Kowalczyk, fleet manager at Gamestec.

“We have priced-up contract hire and it doesn’t work out any cheaper.”

Mini-lease works for vans, too

It is possible to get vans specified to business  requirements under a mini-lease.

BT Fleet, for example, will convert a vehicle to  the customer’s specification so they are matched to  operational needs. This includes racking, roof fixtures, Chapter 8 reflective safety markings and livery.

It says that vehicles can be prepared within as little as one week, and a maximum of four weeks, which is ideal  for responding to unexpected demand. 

Customers are also able to retain any ancillary items that were installed in the vehicles at no additional charge and potentially use again on other vehicles.

Lex Autolease is also able to meet van fleets’ needs.

“We saw an increase in demand for refrigerated  vehicles following the introduction of free school meals for all infant children in September 2014 and we supported another customer with motorway Chapter 8 vehicles after a recent contract win,” Ian Drayton says.

Mini-lease: pros and cons

Pros

■ Useful for organisations doing contract/project work where  vehicles are required for months rather than years.

■ Can be used during an  employee’s  probationary period.

■ May suit  businesses with  a high employee turnover to avoid early terminations/reallocation of  vehicles.

■ Can be used when extra vehicles are required during peak business periods or seasonal periods such as Christmas.

■ Usually  significantly cheaper than daily rental.

■ No lengthy wait for manufacturer lead times: vehicles are often available within a day to  a week.

■ Chance to try a vehicle before committing to three or four year lease – particularly useful for electric vehicles.

■ Can be used as an interim measure when changing leasing company.

Cons

■ Mileage restrictions and penalties for excess mileage which could range from 12p to 50p per mile, for example.

■ The provider may change the vehicles after three, four or six months.

■ Contract hire may work out cheaper for longer periods e.g. three years.

■ There might not be as much vehicle choice as with contract hire.

 

Case Study: Bullivant Media

Bullivant Media uses mini leases rather than traditional contract hire for flexibility.

Russell Beddoe, accounts manager for Bullivant Media, says: “We have 20 Cars on Demand vehicles out of 24 and they are mainly for sales people, who come and go, so our need fluctuates. It gives us a bit more flexibility.

“We are covered by what is in stock. We are not given a massive choice but vehicles have to fit certain criteria – five doors and 1.2-litre or 1.4-litre engine.

“We are given a number of miles that we cannot exceed and there is quite a hefty penalty for that, so we swap them around if we are getting close.”