Customers want to feel safe
about where funding is coming from in the post-crisis
world.
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Partnerships between
banks and fleet management companies are to become more open as
customers begin to demand greater transparency.
The tie-up between Santander and Zenith Provecta,
reported in Leasing Life’s sister publication Motor Finance in June, is an example
of how public such arrangements are likely to be in the future.
The dual-branded fleet proposition will see the
Spanish lender provide funding, while the fleet management company
looks after services from maintenance to daily rental and grey
fleet management solutions.
Speculation within the sector that some banks which
own motor finance operations might attempt to sell appears to be
undermined by Santander’s move. Rather, the tie-up suggests the
underlying principle of fleet management companies providing a
one-stop shop for customers remains unchanged, despite rumours that
banks might look to divest or shut non-core business.
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‘Mover and shaker’
Roddy Graham, commercial director of Leasedrive
Velo and chairman of the Institute of Car Fleet Management, said:
“Santander is a mover and shaker in the corporate banking market,
and with this strategic alliance each partner is providing what
they are good at.
“Lots of banks, for good reasons, decided in the
past that they wanted to have their own contract hire offering.
Many banks are now looking at what their core business activities
are and, even when they find that this is not core, they might
still like the idea of having a service offering,” Graham
added.
Julie Jenner, key solutions manager at GE Capital
Fleet Services said such public alliances are likely to increase as
customers want more information and reassurance on how their fleet
management provider is funded.
In the case of GE Capital, the lessor’s funds are
made available through GE Money, so it does not rely on a bank for
funding.
“We will see more of these open relationships as
contract hire companies seek to give assurance to their customers
that they have links with strong banks and that capital and finance
is not a problem,” Jenner said.
“Leasing companies will have to be prepared to give
comfort to each customer that they have the funding.”
And the financial crisis has encouraged the fashion
for greater disclosure.
Jenner said: “In the
past, fleet managers didn’t really care where their leasing company
got their money from, because they hadn’t experienced any
problems.
“But I guess now people are a little more wary
about it because of the banking crisis.”
The desire for greater transparency comes as fleet
management continues to evolve into a sector radically different
today to what it was 20 years ago.
The major change has been that fleet management
companies are now seen by customers as providing a full suite of
ancillary products alongside contract hire.
Graham confirmed the one-stop shop is now the
sector’s dominant business model.
He said: “If you look at the range of activities in
fleet management today, you have not just a product that helps you
buy the car, maintain it and sell it.
“You have an array of ancillary activities that
customers expect us to provide.”
These activities could include – but are not
limited to – MOT management, licence checks, driver profile
maintenance, order reminders, tax and
CO2 management, mileage capture, grey fleet, test
drive, technical support, sale and disposal of vehicles.
Graham said: “A lot of the major leasing and fleet
management companies are able to provide most of these activities,
but some of the smaller ones provide a very limited level of
services and products.
“This is why we are seeing a significant change in
the industry, because you really need to provide this wide range of
products and services to ensure that your customer is getting good
value.”
Complicated and
expensive
The alternative for customers is to engage with
numerous third-party external suppliers, which can make things
complicated and expensive.
The majority of Leasedrive Velo’s customers take
advantage of the lessor’s full contract hire proposition, although
some need “pure management services on a fee basis”, Graham
said.
“If we have a customer with access to very low
funds and because of their financial structure, owning the vehicle
outright is still their preferred option, then we are fine with
that,” he added.
“We can provide all of the ancillary services on a
fleet management basis, without us owning or taking risk on any
aspect of that asset.”
In this market, the customer is king.
