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A new lease of life

Date: 09 March 2018   |   Author: Sean Keywood

Uncertainty about factors such as Brexit and the new car market's shift away from diesel are making leasing more attractive to businesses than ever before, providers have said.

The fixed cost of leasing and the fact that the user never owns the vehicle removes major financial worries hanging over companies buying their own cars, according to vehicle funding and fleet management specialist Arval.

The firm's head of consultancy, Shaun Sadlier, said, "Our view is that there has probably never been a more persuasive argument for leasing vehicles than the situation that currently exists.

"We are at a point in time where there are significant risk factors hanging over vehicle values in the future. 

"The potential impact of Brexit on the wider economy, which remains an unknown, will be hanging over us for quite some time to come."

According to Sadlier, changing attitudes towards fuel are another important consideration. "We have seen quite a sudden shift away from diesel in the overall new car market, if not to the same extent in fleet," he said. 

"It is difficult to say how this trend will develop. How will the public view diesels, petrols and hybrids in three or four years, and how will this affect their values?"

Ashley Barnett, head of fleet consultancy at Lex Autolease, also believes that the economic climate makes leasing attractive.

"Current economic uncertainty is undoubtedly making leasing more appealing to individual and business customers who want manageable and predictable funding options," he said. "There is a huge opportunity for leasing companies to bridge the advice gap, minimise risk and keep customers on the road, especially in light of further complexities that lie ahead."

According to Barnett, other factors regarding emissions are also an important consideration. He said, "In addition to ongoing regulatory changes, 2018 will see the introduction of the Worldwide harmonised Light vehicle Testing Procedure (WLTP) and 2020 will see the launch of Clean Air Zones in five UK cities.

"As end users struggle to understand the impact of these changes, there is a greater need than ever for expert and insightful consultancy, which is making leasing increasingly attractive."

Sadlier said that an uncertain future market could be mitigated against in a fleet of the size of Arval's, but for almost every kind of business, running its own vehicles represented a risk. "It is no revelation for us to say that forecasting future values is very difficult even for a company like ourselves at the moment, even though we are able to spread the risk over many different types of vehicle," he said.

"For a business buying five, 100 or even 1,000 cars or vans, the same kind of  reduction of risk is simply not possible."

An additional factor, Sadlier said, was that businesses could not begin to match the buying power of the largest leasing companies when it came to other issues, from vehicle acquisition to service, maintenance and repair.

"This is very much another factor in favour of leasing. We are able to lever our increasing size to gain pricing and service standards that even large independent businesses can never hope to match," he said.

Barnett said that the amount of data available to leasing providers was another argument in their favour.

"As well as regularly surveying drivers and fleet decision-makers, we have nearly 390,000 vehicles on fleet, which gives us access to a significant amount of operational data," he said.  

"Leveraging this data to support fleets at decision time is a significant focus for us this year, as we support them with cost management and keeping risk to a minimum."

According to Sadlier, reports from Arval's sales teams suggest that some of the issues at hand are having an impact on fleet decision-makers.

"There has, of course, been a long-term shift towards leasing over many years, but this has not been uniform and, in periods of economic uncertainty, there have been noticeable jumps," he said. "It could be that we are at another of those moments."