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Double-whammy to hammer lease rates

Date: 28 May 2008   |   Author: Tristan Young


Business car operators face a massive hike in lease rates as two finance issues look set to collide.

Finance experts are warning the next 12 months will see a marked rise in lease rates due to the new 160g/km capital allowance regulations and the much publicised economic downturn.

Experts consulted by BusinessCar have said the new complex capital allowance regulations, announced in March's Budget which favour cars at or below 160g/km CO2, will mean those above that figure will become significantly more expensive to lease.

Commenting on the 160g/km issue, Mo Desai of PricewaterhouseCooper said: "I'd expect all lease companies to be looking at it, but I'm not sure all are. It comes in on 6 April but applies to all cars. So if they place a car now it will suffer from 2009 and will have an effect on the lease firm's profit next year."

A source at one carmaker backed Desai, saying only one of the top leasing firms had increased rates so far, but expected others to follow suit soon.

Desai suggested one reason for the delay could be that the Treasury had yet to clarify some technicalities with the capital allowance regulations.

Commenting on the credit crunch, Desai added: "It is having an impact to a certain extent. [But] that impact is being offset by pricing deals from makers trying to attract customers."

However, Peugeot boss Pierre Louis Colin said deals could dry up for some car makers as the Euro exchange rate pushed up the price of cars.

"People need to think smarter about funding," said Alphabet leasing boss Mark Sinclair. "It pays to shop around."

The BVRLA's Jay Parmar responded by saying that as more fleets would buy lower CO2 cars, most would be better off under the new rules: "Broadly speaking, even if the cost of leasing rose slightly, an increasing number of firms will be better off because of the abolition of the lease rental restriction