ING challenges Lex view on bank-backed leasing
24 June 2008
Author: Hugh Hunston
Ian Tilbrook - cropped
Major leasing firms backed by financial institutions are less likely to quit the sector in the face of the credit crunch, according ING Car Lease's managing director Ian Tilbrook.
Challenging the claim made by Jon Walden - head of leasing operation Lex, which is owned by the bank HBOS - that "one or two of the top 10" could decide to exit the industry, Tilbrook said: "The most vulnerable people in the market are the non-bank-owned leasing companies seeking to establish or maintain credit lines. They are more sensitive to increases in funding costs rather than those with major banks behind them. Maybe Jon knows something we don't? Consolidation will inevitably continue in the sector anyway."
Tilbrook, whose company is itself a top 10 leasing firm and bank-owned, admitted the leasing sector is "on a downturn cycle, which will have an adverse effect on monthly rental rates. The value guides are knocking back RVs against the background of the credit crunch, higher borrowing costs and inherent additional pressure on access to funds".
ING's parent company, he maintained, "has not been as exposed as many global banks to the American sub-prime malaise and our existing strong financial position helps in terms of our funding costs".
With a fleet of around 50,000 vehicles following the 2006 takeover of Appleyard, ING has noted a "significant trend where customers are extending contracts from 24 to 36 months or 36 to 48 months. But there is no freeze on company car orders and clients are not returning cars because they have made staff redundant", said Tilbrook.
He added: "Returns on leasing can still be strong but there must be prudent setting of RVs. Leasing companies who set future values on the basis of current values are likely to be exposed."
On the Appleyard acquisition Tilbrook said: "We are now one brand with one culture. Bringing together two systems was always going to be challenging and while there has been some isolated pain for our customers they have been very supportive and the business continues to grow."