The ongoing credit crunch is causing serious concerns for contract hire companies, according to the latest research.
With banks more reluctant to lend money, contract hire firms are finding it increasingly difficult to get credit. The result is higher interest rates which are being passed on to customers,
Fleet managers are facing their own financial pressures from the economy, so what can they do to lessen the im
pact of rising contract hire costs?
John Lewis, chairman, British Vehicle Rental and Leasing Association
“Our figures suggest that the average lease rate has risen just 2% over the past 10 months.
“Next April’s new tax regime makes it more important than ever for organisations to review their fleet policy and take into account the wholelife, after-tax cost of their vehicles.
"Fleet managers need to realise that one car leased at £400 per month will not necessarily end up costing the same as another leased at £400 a month.
"They need to pay attention to emissions and the new 110g/km and 160g/km thresholds.
“Reviewing your car policy in light of these changes is complex, and we would recommend getting some expert advice from your supplier to ensure you are operating the most cost-efficient cars for your business needs.”
Julie Jenner, chairman, ACFO Key solutions manager, GE Capital Fleet Services
“Leasing companies are in the dark about how price is going forward because of the implications in the budget.
“If you have really expensive vehicles emitting more than 160g/km of CO2 you might be better off under the new Expensive Car Leasing Disallowance rules.
“You’ve got to look at absolutely everything. When writing down, who’s taking the risk, you or the leasing company?
“Look at RVs, look at CO2 emissions and get them down below 160g/km wherever possible.”
Ms Jenner says experts in the field would be able to provide a cash flow analysis and recommend further action.
“Now more than ever is the time to look at how your vehicles are funded.”
Colin Tourick, Colin Tourick & Associates Consultancy
Running low-CO2 cars will be crucial to keep costs down, especially once changes to writing-down allowances on cars emitting more than 160g/km of CO2 come into force.
“Low CO2 emitting cars are cheaper. Come next April 160g/km is going to be a cliff edge between high and low cost motoring.
“That’s going to be felt through just about everything.”
One suggestion could be leasing nearly-new cars.
“The greatest single moment of depreciation in a car’s life is when it sails out of a dealer’s showroom.
“A vehicle that’s 12 months old is still the same vehicle it was 12 months earlier.
“HR managers may say it’s got to be new but, at a time of increasing costs, how much sway should HR have?”
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David Dippie, regional chairman, ACFO Director Ashbrooke Fleet Management
“You have got to look at wholelife costs.
"I never cease to be surprised by people that don’t look at them.
“They look at P11D value and leasing costs but, without fuel, you’re not showing total cost.”
Mr Dippie advises shopping around contract hire companies.
“We tend to take the rate schedule from leasing companies that we find to be the most competitive at the time, but that changes all the time,” he says.
“One might be best for six months and then lose it because they’ve changed their RVs.”
The demand for green cars has led to growing waiting lists, with customers of some models having to wait 10 months for delivery.
“This is unprecedented. Historically, placing an order four months before a vehicle’s replacement date is adequate.
“It’s difficult because models are changing all the time. You could order something, then find something much more acceptable two months later.
“To some degree we are in uncharted waters.”
Stefan Erentraut, chairman, vehicle finance division, National Association of Commercial Finance Brokers
Rental prices have risen in the past year and probably will for the foreseeable future.
“I would suggest fleet managers use a credible broker, one that is part of an association which will get the very best deal. They can match the client, the car and the funder.”
Crucial to a good deal in these tougher times is a strong balance sheet.
“The contract hire companies are looking for safety,” he says.
“Fleet managers ought to be looking at vehicles with low CO2 emissions to benefit them from fuel economy and rental costs. Road fund licence will be cheaper as well.
“Each contract hire company will see each vehicle in a different light. That’s why an experienced broker will know who to go to for which vehicle.
"The broker’s expertise and savings will outweigh the cost of their services.”
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