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Rental costs may rise as car maker ends buy-backs

Date: 04 December 2008

Rental firms will have to raise their costs next year as manufacturers cut back on buy-back deals and increase the cost of sourcing vehicles, according to Renault fleet boss Keith Hawes.

"We will have zero cars on daily rental buy-back next year. We've got to the stage where the equations don't stand up so we're not doing it any more," said Hawes. "We've been cutting back on daily rental and motability for the last year and everyone's been saying, what's up with Renault?

"It's suddenly come home to roost. Some people have thousands of used cars in stock from rental buy-backs, while we've got no baggage behind us."

Hawes predicted rental firms will look to lengthen the time they hold onto cars for as a way of mitigating the impact of less-favourable deals. Buy-back cars, where the RV risk is held by manufacturers, are generally on deals of around nine months.

The worry for car makers, though, is that if rental firms start acquiring cars outright and taking the risk themselves, manufacturers lose control over disposal, which could harm RVs.