Lease firms spark extension rush
25 November 2008
Author: Tristan Young
Lease companies are urging fleets to extend their contracts as vehicles come up for renewal, or face a significant increase in costs to keep drivers in the same class of car.
The credit crunch and plunging residual values have made current contract hire rates unattractive.
ACFO chairman Julie Jenner recommended all fleets investigated contract extensions: "Why would anyone want to sign up to the current horrendous finance rates for three years when you can wait six or 12 months for them to settle down?"
BusinessCar contacted the UK's largest lease firms and found the majority that responded had at least an informal policy to extend contracts.
Although the decision will result in decreasing registrations for car makers at a time when they're calling on the Government for financial help, the move will help struggling businesses looking to cut or minimise costs.
Lex, the UK's largest lease firm, has this week introduced a formal policy of encouraging contract extensions.
Andy Hartley, Lex director of pricing, procurement and remarketing, said: "Until last week we had the informal policy of 'if a customer came to us' there were certain levels of discount we were prepared to go to. Now we're about to make our customers aware it's something we have as an offering."
Hartley added: "If someone takes a new vehicle for three years the cost will have gone up because the P11D will have increased and the RV fallen. If you want to extend for six or 12 months it gives flexibility and cost reduction."
LeaseDrive Velo commercial director Roddy Graham said his firm had measures put in place. "We are offering clients extensions with guaranteed and immediate savings on monthly rentals."
Other leasing bosses confirmed that policies were in place for extension but declined to comment because they didn't want to harm their relationship with car manufacturers. One, however, said: "At the moment it's the worst possible time to take on a new lease."
Several executives indicated that with either formal or informal plans in place, contract extensions were currently up between 25% and 100%.