Vincent St Claire, managing director, Alliance Asset Management gives his predictions for the year ahead.

 

"Cost management will remain the agenda-topping focus for fleet decision-makers in 2010, but rather than extending vehicle replacement cycles to combat tough economic conditions taking delivery of new vehicles will be crucial.

"Many fleet operators took the decision to extend vehicle replacement cycles in 2008 and 2009 to combat the worst affects of the recession, but that opportunity will be diminished in 2010.

"Vehicles that are now five years old and have maybe clocked up 110,000 miles or more have reached a pivotal point in relation to their age and maintenance profile.

"Outright purchase fleets that continue to run these vehicles will find that SMR costs escalate significantly, while contract hire and leasing companies have a reducing appetite to continue to lease them.

"As a result, businesses that remain concerned about the economic outlook will turn to utilising rental or mini-lease products to meet their immediate company car requirements as instinct means they are not prepared to either buy vehicles or commit to new leasing contracts.

"However, depending on market sectors, companies that are looking forward to 2010 and beyond with confidence and can detect the ‘green shoots’ of recovery maybe prepared to invest in the purchase of new vehicles or sign-up to three or four-year contract hire agreements.

"The recession has meant that the vehicle inventory of rental companies has reduced as motor manufacturers have pulled back from the short-term hire sector. Therefore, fleets may find it difficult to source all their vehicle requirements from a single supplier.

"As a result, fleet managers must be aware of not only the cost per day to rent vehicles but also the costs of managing suppliers and the transactional cost of dealing with multiple invoices in different formats from a number of suppliers.

"Consequently, to help keep costs under control fleet managers should look to source their short-term vehicle requirements through leasing and fleet management specialists who either have their own supply of cars and vans for hire or have partnerships in place with a range of rental companies. This will enable both rental and transaction costs to be kept in check.

"Fuel prices will continue to rise in 2010, first through the increase in VAT back to 17.5% and then with the April 1p above inflation increase. In addition following the general election, which must be held in the first half of the year, a newly elected Government may look to increase VAT to 20%.

"The rising cost of fuel could impact on second-hand demand for low-MPG returning vehicles such as 4x4s and therefore residual values will come under pressure.

"Finally, the relationship between fleet decision-makers and their chosen suppliers will become even more crucial as banks continue to review lending criteria and the number of funders reduces. Fleets chiefs must be certain they are forging partnerships with suppliers who are financially sound and in the marketplace for the long haul.

"Any doubt over the financial stability of any leasing or rental supplier should spark concern and a switch to an alternative provider."