Annual barometer shows positive sentiment among European
fleet operators
Demand for operational leasing contracts is likely to grow
despite fears over higher cost pressures, according to research
from the Corporate Vehicle Observatory (CVO) Barometer.
The study found most UK fleet operators are concerned about rising
costs, with 74% of managers from the largest companies (1,000+
staff) expecting cost pressures on their fleet to increase this
year.
The majority of small and medium UK firms also expect costs to
increase, with an average of 49% of fleet decision-makers
anticipating a rise.
Operators in Europe were more optimistic, however, with 53% from
the largest firms pointing to increased costs and an average of 42%
in smaller and medium firms doing the same.
Despite cost fears, calculating the difference between fleet
companies intending to develop their use of operational leasing and
those intending to reduce usage over the next three years, the
study showed positive figures in favour of an increase in the fleet
leasing product.
Large-sized (100-999 employees) firms showed intent to develop
leasing, responding positively by a margin of 39% and the largest
companies wanted to introduce operating leasing by a margin of
22%.
Medium-sized (10-99 employees) and smaller (1-10 employees) firms
showed slightly more reluctance to increase their adoption of
leasing, but the results were still positive, with a 4% and 16%
margin in favour of finance over the next three years,
respectively.
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Monthly costs
When asked about their main
motivations for implementing operating leasing in their firms,
fleet managers from the largest firms stated fixed monthly costs
and avoiding the risks of a lower resale value were the main
appeals to their business.
In contrast, data from the largest firms in Europe did not show any
concerns with potential lower resale value of vehicles, with only
8% indicating this as a reason for using car finance, compared to
26% of those surveyed in the UK.
Medium-sized firms also pointed to fixed monthly costs and concerns
over lower resale values, but were also attracted to operating
leasing because of the reduction in administration tasks which
medium-sized European companies also acknowledged.
Worry over the lower resale value of vehicles was clearly expressed
in the data. Four-fifths of fleet operators from small companies
surveyed said they believe the resale value of used vehicles will
fall this year and almost two-thirds of both the large and the
largest companies said the same.
Mike Waters, senior insight and consultancy manager at Arval, said:
“These are clearly things that provide benefit to companies at any
time, but often take on even greater significance during an
economic downturn when, as the research shows, cost pressures are
at their peak and organisations crave stability.
“The risk of the secondhand vehicle market is a major reason why
organisations opt for operational leasing packages rather that
purchasing vehicles themselves. In recent years the used vehicle
market has been volatile and we have seen significant fluctuations
in used vehicle values.
“For companies of all sizes, contract hire is a smart option to
take because of the stability and certainty that it provides.”
Growing fleet
Elsewhere in the Barometer
data, UK companies on the whole expect their fleet size to increase
within the next three years.
Of small and medium-sized companies, 21% responded positively, and
the UK was more positive than the rest of Europe, which came in at
12%. With 4% of UK firms stating they believe their fleet will
decrease, the data gave a margin of 17% in favour of fleet growth,
up 5% from last year.
Of the largest firms, 26% said they believe their fleet will grow
during the year, which also beat Europe’s expectations at
21%.
However, more respondents from the UK’s large firms also believe
their fleet will decrease (16%) given a 10% margin in favour of
fleet expansion, a fall 4% from last year.
Waters added: “Given the current economic conditions, in the UK,
and around the world, it really is no surprise that fleet operators
expect cost pressures to increase over the course of the year.
However, it is reassuring that they do not plan to respond to this
by cutting the size of the vehicle fleet.”
“The reality is that companies across the UK rely on their vehicles
to operate irrespective of the economic conditions. So while cost
pressure creates a focus on the best ways to manage fleet spend, it
often shouldn’t translate into a reduction in fleet size.
“In these conditions, fleet best practises and the use of funding
methods like contract hire provide a way for companies to reduce
their financial risk, cut out unnecessary fleet costs and
effectively manage tight budgets.”
However, the survey also asked fleet decision-makers across Europe
about what would motivate them to develop outright purchase of
company vehicles, and full control of the fleet was given as the
overwhelming reason.
The CVO was set up and is supported by leasing and fleet management
company Arval. It has produced an annual report since 2003 from a
survey of more than 4,800 fleet operators and decision-makers.
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