Fleets face up to rising cost of short-term rental

Rental has been a double-edged sword for fleets.

It offers them the flexibility to reduce their car and van fleet sizes to boost utilisation and can be a stop-gap measure to eliminate excess mileage charges or keep staff mobile while awaiting supply of their new vehicle.

But prices have been steadily rising which, together with some issues over availability, vehicle standards and drop off/collection times, has deterred many fleets.

“One of the key factors affecting rates is that the majority of vehicles on UK fleets are imports and, therefore, the weakness of the pound to the euro has had a bottom line impact on costs,” says Ken McCall, managing director at Europcar.

“Customers want the highest quality service, but there is a cost attached to that and that is also contributing to a small increase in rates year on year.”

Get rental right and it has a vital role to play in a fleet operation.

The BVRLA has set up a steering group to improve the availability of competitively-priced funding for the vehicle rental and leasing industry and believes inflation is a key cause of the increase in prices.

“Prices of new vehicles have risen sharply, as have repair and insurance costs.

"Combine this with the extortionately high cost of fleet funding and you have some significant upward pressure on prices,” says John Lewis, chief executive at BVRLA.

Falling residual values have also had an impact, which means more rental companies have to recoup revenue from their vehicles while they are on fleet.

Fleets such as PricewaterhouseCoopers (PWC) have been able to sidestep these price rises by negotiating fixed-price contracts.

“We underwent a full tender exercise last year that gave us fixed pricing for a three-year period.

"This protects us from market increases and gave us a good insight into the current supply market,” says Mark Avery, head of business services at PWC.

“The biggest challenge for the rental market has been fleet provision, financial terms and availability. In general, this has led to the suppliers running the vehicles for longer periods than they would usually wish, which could lead to dissatisfaction from drivers.”

The shortage of new vehicles in the market and the rising costs of cars is, Lewis believes, a temporary issue, attributed largely to the scrappage scheme.