In the spotlight: Thrifty

It is three years since the car industry first felt the effects of the credit crunch and the recession.

Now, helped by a resurgent fleet sector, it is showing signs of regaining strength but some of the organisations that depend on it are still picking up casualties.

At the end of last year, two short-term rental companies (TLS and Leaseway) went into administration and, according to Roger Hancock, managing director of Thrifty Car & Van Rental, although the situation has improved, some companies could still be vulnerable.

“The fleet funding landscape has changed almost completely,” he says. “It is now too risk averse, and some smaller, very well run companies have folded.

“The funding environment has become more expensive and both of those issues combined with fluctuations in residual values have made funders more nervous.”

There had been a collapse in residual values in the second half of 2008 at the start of the recession, although most of the lost ground was recovered in 2009.

Among the hardest hit had been 4x4s, but two consecutive harsh winters have restored some demand.

However, in non-wintry conditions, 4x4s and other large vehicles remain vulnerable to the effects of rising fuel prices.

It makes life more difficult for any organisation that takes the residual value risk on its vehicles, but Hancock says Thrifty’s policy has worked in its favour financially as well as allowed the company to respond better to customer demand.

Thrifty has continued expanding its network, moving from 58 franchise sites in April 2006 to 85 owned businesses in 2011, five of which (Derby, Doncaster, Feltham, Maidstone and Shrewsbury) are new this year.

Car manufacturers have made known their intention to reduce their participation in ‘short-cycle fleet business’ for many years, but more recently these aspirations seem to have held true as oversupply by car manufacturers diminished.

“There has been less short-term buy-back product available in the market place,” says Hancock.

“But 90% of our fleet is on risk in any case so we’ve had no issue with procuring our fleet at all as we take the residual value risk.

“The used market has been firm for the past couple of years, and the fact that fewer new cars are available with longer lead times is helping us.

"There is pent-up demand and our cars are attractive to dealers when they are de-fleeted. Taking the residual value risk on the vast majority of our fleet has worked in our favour, although there are many other advantages.”

The average age of Thrifty vehicles is four months which gives it one of the youngest fleets in the country.

“The reason we chose our procurement method is that it gives us complete flexibility,” he says.

“We can remarket cars and vans when we have scope within the fleet to do so rather than at the end of its term with us.

"With some of the delays in delivery of new cars we know we can de-fleet vehicles with customers waiting for them.”