A new funding model is emerging for contract hire companies that could lead to higher lease rates.

Finance providers who lend the capital needed for contract hire companies to fund their vehicle purchases have been reviewing their lending policies since the credit crunch began in the autumn of 2008.

Anticipating this change, NVR Fleet UK began discussions with its principal lenders last year and has now become the first contract hire company to announce that it has restructured its debt allowing it to pay a substantial deposit for all future vehicle acquisitions.

This model of financing will become the norm, with many lenders already requiring larger deposits from their contract hire customers, said NVR chief executive officer David Edwards.

“They will demand increased deposits and I think this is probably the right thing for the industry,” said Edwards. “We saw this coming in September/October last year and talked to our asset-backed funders.

“The majority of asset-backed lenders will look to increase their security by looking for greater deposits – this is already happening.

“Ironically this will lead to an increase in prices. We will see this happening in the summer as businesses are forced to charge a true rental charge for the assets that they contract hire.”