David Brennan on how leasing giant LeasePlan meets the demands of fleets and the challenges of cost reduction.

Is ‘big really better’?

Often when companies expand they lose touch with the basics that made them successful in the first place.

Often big is not better, particularly when it comes to customer service at a personal level.

LeasePlan, the UK’s second biggest leasing company, has constantly strived to ensure that satisfying the customer remains a central core of its business proposition.

It believes it delivers excellent customer service and it has the awards to back up this belief.

For the second time in three years, LeasePlan collected the customer service award at the Fleet News Awards.

“We enjoy winning the customer service award,” says LeasePlan managing director David Brennan.

“When we see customers we say that we have strong prices and the best service and the award is independent proof of that. It’s a powerful message to take to customers.”

LeasePlan’s only interest is contract hire and fleet management; it has no other business to rely on for profits when times are difficult.

And, for Brennan, outstanding customer service is the key to profits.

Fleet News: Fleets are increasingly demanding transparency from their leasing supplier. How do you meet those expectations?

David Brennan: All our systems are built around open calculations so it’s always our starting point.

More and more customers are looking for transparency and more value the fact that we can give them open contracts.

For example, when we sell the vehicle at the end of the contract we share any profit with customers.

A large proportion of customers have this agreement.

We put in place programmes to reduce damage and customers are open to that because they share in the profit.

If we get it wrong then we lose out, not the customer.

And if we get it right, we share the profit. It alleviates the risk that they have overpaid.

The percentage return varies – anything from 100% to zero – but the amount obviously affects the lease rate they pay.

Some leasing companies erred on the side of caution after the big RV slump of 2008; now some are being aggressive in their forecasts. What’s your approach?

We go into a contract to try to get it absolutely right.

For certain cars, common fleet cars, RV mistakes might be just plus or minus 1%.

On less common cars, we will be out by more.

It also depends on whether the manufacturer distresses the business model in a way that we hadn’t foreseen – that affects the residual value. But we get it right most of the time.

Do you penalise manufacturers who force the market?

Yes. If we see a car that is being actively distressed we will reduce the residual value.

We have had conversations with manufacturers that aren’t happy about that.

But it’s our residual value and we have to react.

We adjust our values monthly on an individual car line and on a quarterly basis we review everything – residual value, maintenance, all our financial products.

Is there much aggressive activity at the moment?

We are seeing some aggressive action by certain manufacturers on certain model lines.

We are watching it carefully to ensure that distress volumes don’t become too much. We need supply and demand stability.

It’s nothing to get too concerned about at the moment – it’s a bit on and off by month.

The country is going through a period of very low growth after the initial recession. What are your expectations for the year?

There’s a glimmer of confidence.

The UK market is reasonably stable; business has been managed well and if it’s in the right shape it will return to employment and buying vehicles.

Our scale gives access to good competitive rates of funding which enables us to offer sharp pricing.

As a result, business is strong in corporate and SME and we are winning new customers.

The public sector is the toughest but we are holding our own in a declining market.

There are lots of tenders where only price matters not service, and that reduces the available margin to invest in improving the business.

We are also winning global business; we are seeing lots of customers in one or two countries that are looking at having the same suppliers.

It’s not just large pan-European or global customers.

It’s powerful for us to be in 31 countries because we can say to the company to talk to their counterparts in another country that we already have a relationship with.

We have also introduced a new remarketing system where we can sell our cars in other markets to increase the buyer base. In the UK it will be small at the moment; it’s biggest in mainland Europe.

We are also looking at increasing our channels to market on the back of the internet for the best net yield – total profit minus total costs, which takes into account the speed of the sale.

The route to market will depend on the condition of the car.

Ask a fleet manager what their biggest challenge is and they say cost. How can you help?

The challenge is always cost reduction; that’s the agenda, to show opportunities to their board. We look at every possible part of the process.

We look at how we work with them versus how we work with other clients in terms of process, policy, products, fuel, drivers, accident management, etc.

We send out value statements that show every initiative we have suggested and we calculate for them the savings that could be delivered.

Then it’s down to the customer to decide what they want to do.

In our most recent value statements campaign we identified more than £50 million of potential savings for clients, of which they have realised £22m to date

Some customers take 90% of our ideas; others take 10%.

And who are you having these conversations with?

In a large fleet it starts with the fleet manager.

They are empowered to make decisions. In a smaller company, it’s more often a board making the decision.

The key is to deliver customer service. We have to delight all the drivers and in addition provide ideas to whoever is running the fleet.

To do this we have to align with their strategic agenda and think about how we can match those goals with our agenda.

It’s about more than operational tactics; it’s strategic.

LeasePlan continues to grow. In 2010 Brennan laid out plans to expand to a managed fleet of 150,000 by 2015; it’s already at 145,000.

He is halfway through his five-year plan while future aspirations remain rooted to organic growth.

The UK leasing sector is awash with speculation about the next big purchase and further consolidation. It remains highly fragmented.

“In other countries we are usually number one of number two with a market share of 50-60% and two or three other main competitors,” says Brennan.

“Here, we are number two with a market share of 10%. But we will continue to grow.”

For Brennan and LeasePlan, big really does mean better.

Factfile

Company LeasePlan
Managing director David Brennan
Time in role Seven years (since January 2006)
Total vehicles under management 145,000
Funded fleet size (FN50 2012 figure) 134,115
Car funded fleet (FN50 2012 figure) 98,631
Van funded fleet (FN50 2012 figure) 35,484
FN50 position Number two