Vehicle finance to attract new funders in 2011
More banks will return to the vehicle rental and leasing market this year, bringing extra funding to help the industry meet growing demand for rental and contract hire.
The BVRLA believes that funders are taking a more positive view of the vehicle finance market, recognising the excellent returns and low risk associated.
The association also sees smaller leasing companies working together, using their combined strength and expertise to present a convincing funding case to potential lenders.
According to BVRLA chief executive John Lewis, this improved funding outlook for the vehicle rental and leasing industry could not be coming at a better time.
“The recovery we expect to continue this year will be a largely credit-less one, with smaller businesses in particular struggling to meet their borrowing requirements.
“However, I am confident our members will provide the vehicle finance to ensure this economic growth can continue.”
Aside from the key issue of funding, Mr Lewis has given a number of other predictions for 2011:
The fleet car market
“Total car sales will continue to hover around the two million mark and may well fall short of last year’s level. Fleet sales are likely to take an even greater share of the new registrations and manufacturers will be competing hard in this area.
In this environment, certain manufacturers will come under more pressure to improve their supply of new vehicles – standard lead times of up to 20 weeks are just not acceptable. A continued improvement in the exchange rate versus the euro may help this by encouraging manufacturers to push more product into the UK.
Our members will be hoping that more manufacturers follow Renault’s lead in simplifying their model line-up.”
The commercial vehicle market
“The commercial vehicle rental and leasing industry saw a tumultuous end to 2010, with a number of companies being taken over, exiting the market or going into administration. While regrettable, these events have shown that some smaller operators who have relied on a simplified, cost-based product offering have struggled to compete with larger operators who have greater economies of scale and the ability to invest in value-added services such as fleet management. Our members forecast a continuing growth in demand for commercial vehicle rental and leasing in 2011, particularly for vans. As the latest truck and van sales figures show, many of them are investing in new vehicles and there is no danger of the market not having enough capacity. We appear to be moving towards a more balanced market where supply capacity is more closely matched to demand.”
Contract terms
“The contract extensions that proved so popular over the last couple of years will now drop away, which may lead to a small spike in fleet registrations in the first quarter of 2011. However, fleets that have got used to operating vehicles on a four-year lifecycle may now choose to make that the norm because it helps them hold costs down.”
Outsourcing
“Fleet management, either as part of a vehicle funding agreement or on its own, will grow this year. More and more organisations are going to decide that they haven’t got the expertise or inclination to manage their fleets in-house. We are already seeing this trend within public sector organisations hit by the spending cuts.”
Salary sacrifice
“Salary sacrifice will continue to grow in popularity. Indications so far are that it is attracting people who used to take the cash instead of a car rather than being a substitute for the traditional company car market.”
Greening the fleet
“Environmentally-friendly vehicles will continue to attract a lot of interest, but few private companies are yet willing to take the risk or pay the extra cost. However, we expect our members to take on hundreds of electric and plug-in hybrid vehicles this year, mainly for public sector clients. The experience gained managing these assets over the next few years will be invaluable when these vehicles finally start to hit mainstream fleet usage, towards the middle of the decade.”
Leasing brokers
“This will be the year when leasing brokers finally come in from the cold. A combination of rising standards and more stringent underwriting criteria from funders will see a smaller but more professional core of brokers emerging. With a growing market of SME customers and a more receptive group of manufacturers willing to work with them, 2011 looks like being a good year for this route to market.”