NEXT year is going to be a tough one for the fleet industry, with a marked slowdown in the number of company cars bought by businesses. The 1998 Lex Vehicle Leasing Report on Company Motoring forecasts a total fleet market this year just 1% or 2% above last year's 1.15 million cars, and a 6% fall to about 1.1 million fleet registrations in 1999.

'The market is due for a difficult period over the next 18 months as new company car sales flatten,' it says. 'We expect this to increase the fight among manufacturers and dealers for market share.' The report does predict good growth in 2000 and 2001, but with fleets keeping vehicles for longer and negotiating better terms, suppliers' margins will be squeezed.

This is already evident over the past decade, where the average transaction price paid by companies for a new car has risen modestly from £14,700 in 1988 to £15,800 in 1997, compared to a 30% increase from £10,700 to £13,100 for private motorists.

Fleets have also extended their average replacement cycle from 2.2 years in 1989 to 3.1 years in 1997, reducing suppliers' sales opportunities, and nearly new/used cars are playing an ever more important role in fleet policies. On average, just 71% of company cars are bought new and this figure falls to 66% for fleets running between one and nine cars.