Small fleet business is an area that car manufacturers are increasingly looking at.

But is it the same in leasing – are leasing companies turning their attention to them too? And what do leasing providers have to offer the manager of a small fleet?

Growth opportunity

Some leasing companies have made no secret of their interest in the market, with LeasePlan’s David Brennan saying in a recent interview with Fleet News (March 12) that he sees “growth opportunity” in the sector.

Lombard Vehicle Management has also been paying closer attention to small fleets, setting up a dedicated sales team last year to work closely with local businesses.

Specialist small fleet staff at Lombard’s Business Finance Centres provide a service for fleets of up to five vehicles while fleets of more than five vehicles are catered for by a field-based team.

“Small businesses present a significant opportunity as leasing companies have traditionally neglected the segment,” suggests Nigel Kerr, divisional director at Lombard.

“They tend to provide a service through a remote centralised sales office, whereas we have a large, dedicated team working locally with them.”

Other leasing companies, such as Lex, say that they are not specifically targeting the sector. Lex’s corporate director John Taylor says its aim is to be closer to all customers, not just small fleets.

And it’s a different approach entirely at GE Capital Solutions Fleet Services. Last November, the company said that within two years it would be dealing only with fleets operating in excess of 50 vehicles.

Rich Green, managing director, said the move was designed to play to the company’s strengths, enabling it to focus on investing in the products and services that make a difference to major UK corporate and pan-European customers.

Richard Bunn, director of FleetLine (the LeasePlan brand which focuses on fleets operating fewer than 100 vehicles), and Martin Brown, managing director of Fleet Alliance, both suggest that there is a tendency for leasing companies to “dip in” and “dip out” of the market.

New trend?

Targeting small fleets does not appear to be a new trend for leasing companies.

Taylor says that Lex’s interest goes back to its inception, 30 years ago, while Masterlease says it has targeted them for more than 20 years.

Phil Peace, director of sales at Hitachi Capital Vehicle Solutions, explains: “The market grew up with small businesses. Large and small fleets were in the mix.

"The difference now is that there’s a defined strategy and proposition for sectors.”

Lloyds TSB Autolease’s Tony Murtagh, head of regional sales, agrees: “Our focus has been on all of our different clients for some time.

"Sub-segmentation happened about five years ago but we haven’t set up our small business proposition Lloyds TSB Autolease Direct from nothing.”

LeasePlan established FleetLine eight years ago, and Bunn suggests that no leasing company should dismiss this area, but it depends on whether the provider has the resources to tap into the market or not.

Arguably, the size of the market means that leasing companies can’t afford to dismiss it.

Taylor suggests there are two million companies in the bracket and that 10 to 20% of them have a fleet.

Murtagh, of Lloyds TSB Autolease, meanwhile, suggests there are more than a million such businesses, but due to the number of ‘one-man bands’ the real size of the opportunity is about 400,000.

Despite general agreement that the market offers “a massive opportunity”, leasing companies are aware that the market could shrink with many small businesses being hit by the recession.

Level of contact

An area of debate is how much contact small fleets want from leasing providers.

Do they just want to make use of a leasing company’s website?

Do they want telephone contact, or would they prefer face to face contact?

Taylor says Lex offers “a blend of field, electronic-based and phone call contact”. He suggests that a manager of a small fleet could have monthly contact if they wanted but CRM (customer relationship management) says they want different things.

Murtagh suggests that Lloyds TSB Autolease treats communication differently, saying that there is a “lighter touch” with some of its products, with more utilisation of the internet.

“There are finances to consider – the cost to serve your client,” he continues.

“It’s more expensive to have someone based in the field and we can keep in more frequent contact with telephone calls.

"But it’s not a black and white line. We can do face-to-face meetings if that’s what the customer wants.”

Bunn also says that FleetLine’s contact is “driven by customer demand”.

“Some firms don’t want the same level of contact as larger fleets,” he says.

“Fleet is not a core part of their decision- making process. If they only buy five cars then it’s not core, compared to someone who buys 500 cars and expects a dedicated account manager.

“But we do have face-to-face contact with small fleets on a quarterly basis.”

FleetLine’s Bunn points out that it commissioned independent research in 2007 and found that only 4% of the 200 customers and prospects surveyed would appreciate an occasional visit.

The respondents all had no more than 100 vehicles.

Peace says Hitachi’s contact is largely through technology, but adds the caveat “it depends on the circumstances”.

“Some of our small fleet customers may say that all they need is for us to pick up the phone because cars are not a core part of what they do.

"But there’s no hard and fast rule. We have an account management team that can provide face-to-face contact.”

But Fleet Alliance believes small fleets do want face-to-face contact.

“There’s a perception that they just want a phone service and it’s nonsense,” says Brown.

“We have always focused on fleets of below 25 vehicles as we started in Scotland where there are a number of small businesses. We now deal with larger fleets, but our core is still there.

"Our experience tells us that they want face-to-face contact. They want to feel valued and to be treated the same as a company with a fleet of 100 vehicles.”

David Hosking, managing director of Tusker, also disagrees with a telesales approach, pointing out that Tusker has field-based account managers for every small fleet customer.

Lex also has dedicated account managers but the number of customers they look after varies by fleet size.

Lombard, which has seen vehicle deliveries in the sector increase by more than 50% in the past year, puts its success down to its new sales structure, which supports businesses more closely.

Are brokers best?

Some leasing companies, such as Lex, operate a broker model as well as going direct to small fleet customers, and Taylor says that “brokers have a place”.

“Some leasing companies are stepping back from brokers because of capital and funding constraints,” he continues.

“That suggests it was high volume and low margin business, which isn’t attractive in the current market place. But we’re still in the broker market and don’t plan to change.”

LeasePlan also has a broker franchise called Network which provides more face-to-face contact than FleetLine.

Bunn says that he taps into the market through the franchisees.

In contrast, Hitachi made a commercial decision last December to only target small fleets directly and has an in-house team dedicated to new and existing business.

“Brokers are price driven, they focus on special offers, and we made the decision not to go through them,” says Peace.

Of course, many of the bank-owned leasing companies also benefit from access through the banking branches.

What leasing companies can offer small fleets

Most leasing companies are prepared to offer small businesses the same products they offer larger fleets.

For instance, Fleetline offers finance products, open calculation (transparency of costs), SafePlan (duty of care), rental products, accident management, maintenance and a consultancy team.

Bunn says that FleetLine “flexes its products to suit their needs”.

Hitachi also offers a wide range. Alongside the finance products, small fleets can choose grey fleet management, which covers MoT, insurance and driver licence checking, as well as risk products such as driver training.

Lloyds TSB Autolease has just launched some new products – glass replacement and Fleet Sense, a road safety package.

Not surprisingly, leasing and maintenance appear to be the most popular products with small fleets.

But Bunn says he has seen more enquiries about sale and leaseback recently, and that small fleets are seeking more advice on products such as daily rental.

As well as access to expertise, there are many financial benefits from choosing leasing.

“If they buy their vehicles then their capital is tied up in them. Leasing is the perfect way to free up capital,” Bunn says.

Small fleets will also benefit from monthly, fixed payments which will help them to budget.

Murtagh points out that another advantage is the economies of scale that a large organisation such as Lloyds TSB Autolease can bring, meaning the levels that they buy vehicles at means they are able to access discounts which would be unavailable to small-scale buyers.

There are tax benefits, too, with Hitachi suggesting that the changes to capital allowances will make leasing more attractive for businesses with 30 to 50 vehicles on their fleet.

What is a small business?

Defining a small business is a grey area.

The Government uses the term SME (small to medium-sized enterprise) by turnover and Lombard also uses this method, classing any business with a sub-£25million turnover as
an SME.

But other leasing companies take a fleet size approach with Lloyds TSB Autolease, Tusker and Hitachi classing them as less than 50 vehicles, Lex saying sub-40 vehicles, and Masterlease and Fleet Alliance saying 25 vehicles and below.

Latest Government figures – released last year – reported that there were 4.7 million SMEs in the UK at the start of 2007, employing an estimated 13.5 million people. Combined annual turnover was estimated at £1.44 billion.

Case study: Brewin Dolpin

Financial services company Brewin Dolphin cannot be considered a small business, but in fleet terms the company is small.

Payroll manager Mark Dines, who is responsible for the company’s 50 cars, says that fleet is not core to their business.

Only six cars are essential business tools and the rest are perk vehicles.

The vehicles are leased from FleetLine and Dines has a dedicated account manager who he sees on an annual basis, which he considers enough face-to-face contact.

He is aware of the early termination penalties and damage penalties a leasing contract contains, but considers the terms and conditions fair.

Case study: Eurotec Services

Eurotec Services, a provider of lighting and heating services for major retail clients, is a business which has turned to leasing, signing a three-year deal with Lombard.

The company has around 80 employees and 65 vehicles. It has agreed a sale and leaseback arrangement, with 35 of the vehicles already transferred to Lombard.

Ricky Hall, Eurotec partner, admits that the handover could have been smoother and warns other businesses to be wary of hidden costs, such as charges for a set of spare keys, and says that parking fines have been a thorny area.

But overall he is glad that he did the deal.

“It was a no-brainer to choose leasing and with sale and leaseback we don’t have the hassle of selling the vehicles or the same maintenance costs.

"It’s a real benefit to have budgeted monthly costs and we are saving around £11,000 a month.”

When the handover is complete, Hall will have a brand new solus Volkswagen fleet of Passats, Transporters, Maxis and Caddy, chosen for the range of vehicles and their reliability.