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The contract hire market is on the verge of a massive shake-up over the next couple of years, as financial institutions weigh up an exit from the sector in an attempt to safeguard profits, according to the directors of top-20 leasing firm Leasedrive Velo.
"The scars of the 2008 RV collapse are deep in the memory of shareholders who recognised that 2008 and 2009 probably weren't the time to dispose of a business, but in my opinion shareholders are starting to emerge, say there are some good points about the business and decide it's time to realise their exit strategy," said Leasedrive Velo managing director David Bird. "Contract hire delivers an element of volatility that doesn't sit well with shareholders; where contract hire was seen as a means to an end, now they're saying it's not for them."
Bird predicts some major shifts over the next couple of years. "There has been a bit of a hiatus over the last two years but I see huge change - there will be a reduction in the amount of large financial institutions at the top of the scale," he told BusinessCar, predicting that "overseas investors" may come in to fill at least part of the gap, or that the leasing elements of some businesses could be floated as separate stock exchange listings.
Leasedrive Velo is also exploring the possibility of providing 'white label' service provision to companies looking to maintain a leasing and fleet management presence.
"If you don't want to be a service provider, you will still need someone to do that for your customers," said Leasedrive Velo commercial director Roddy Graham. "They should outsource back-office service provision with clear service levels and KPIs as to how the brand is managed.
"They've got to know whoever they decide to work with is able to protect their brand," said Graham. "We supply support to service and benefits, we're not a car supplier. Valuing employees is critical, people need to be very careful about who delivers such a sensitive part of allowance - with pensions, a car is one of the two most valuable benefits, and companies have to be really selective about who deals with that."
"Outsourcing with the right partner is very favourable for a lot of major financial institutions," added Leasedrive Velo finance director Robert Whitrow. "I see movement between funding providers and service providers," he concluded, in what was a prescient statement made a few days before Santander and Zenith Provecta announced their recent tie-up.
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