Road test.
| Author | Margolis, Adrienne |
| Position | Statistical Data Included |
If ever times were tough for the fleet market, they are now, with high fuel prices and punitive government measures. But it seems that treating 'em mean is keeping companies keen.
We maybe becoming more environmentally aware, but the British love affair with the motor car is as passionate as ever, if trends in the fleet and company car market are anything to go by. The fleet market, defined as companies with more than 25 cars, has grown by 10 per cent in the past decade alone. Registrations are up from 35 per cent of the total new car market to 45 per cent. In 1999, this amounted to over 1.2 million units sold.
Companies buy cars for different reasons. Many need a fleet for business purposes, but also offer certain employees a car as a perk. In view of the high cost of fuel and the government's attempts to persuade drivers to stay off the road, it is surprising that both these markets are currently being described as buoyant.
One reason for the high demand is a growing trend for companies to off load the management of their fleet by using contract hire companies and these companies now deal with about half of the entire fleet market. "Contract hire firms have significantly increased their market share, because lots of companies do not Want the financial burden of car ownership," explains John Taylor, procurement manager at Lex Vehicle Leasing. "The contract company owns the cars and carries the debt of that purchase. This means that the transaction is off-balance sheet for the client, who does not have to show it as an asset or a liability."
Another reason for hiring rather than buying is that companies increasingly prefer to outsource non-core administration. They have also realised that leasing a fleet is a way of off loading risk. A typical company car is kept for three years. "No one likes volatility. If you own a vehicle, you do not know whether you will sell it at a profit or a loss. One of our selling points is that rental charges are guaranteed for the period of a lease," Taylor says.
The climate in the used-car market reinforces this point. Secondhand values are 20 per cent down on three years ago, and contract hire companies are having to tackle this problem when they try to sell their stock.
"Three or four years ago, no one could foresee the prices in the used-car market," points out Nick Gaffney, marketing manager of contract hire firm Velo. He admits that this, in addition to the uncertainty that has resulted from government...
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