please
Confidence is high among contract hire lessors in commercial
vehicles, with business volumes growing, especially in heavy
trucks.
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Though perhaps still best known in the business car fleet
sector, contract hire is very long established in the UK in both
light commercial vehicles (LCVs) and heavy goods vehicles
(HGVs).
Although fleet sizes across the industry seemed static in the
LCV sector over the two years to 2006, most players seem bullish at
the present time. “Demand is strong at the moment, and as a company
we are confident that this will continue,” says Wayne Millward,
operations manager at Lombard
Vehicle Management (LVM).
Within the model of a service-inclusive operating lease,
contract hire in the commercial vehicle (CV) sector has evolved
into a flexible package of value added support services. “There is
a growing trend in customers wanting a total solution rather than
just a ‘vanilla’ vehicle,” says Millward. “We offer not just
funding but technical expertise, consultancy, vehicle specification
and build, plus delivery of a turn-key product.”
CV contract hire funders have been in the forefront of moves
towards greater fuel efficiency and reduced carbon emissions. A
deal this year by Lombard to supply 1,700 Vauxhall
Vivario vans to the BSkyB media group on a three-year contract hire
deal represented the UK’s first large scale fleet trial of the B30
bio-diesel.
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By GlobalDataAnother leading contract hire player, Lloyds
TSB autolease, earlier this year launched the carbon concept
vehicle (CCV). Based on the new VW Transporter Sportline SWB panel
van, modified by Chambers Vehicle Conversions of Stafford, the CCV
uses carbon fibre materials for bespoke equipment such as the
racking system, in place of materials like steel and wood or
polypropylene. “The CCV provides extra storage capabilities with a
lot less weight than conventional systems. The result is lower
costs for the operator and environmental benefits”, says Graham
Neagus head of specialist commercial vehicle unit at Lloyds TSB
autolease.
Road safety issues are also prominent in the latest design
initiatives by contract hire players. “The specialist trade vans
that we have just rolled out offer vehicles compliant with duty of
care considerations with crash-tested racking, bulkheads and so
on,” says Milward.
Major contract hire players in CVs
Lex
Size of fleet: around 35,000vehicles
Head of team: John Taylor, sales director
Contacts: 0870 112 4000/ marketing@lex.co.uk
Leaseplan UK
Size of LCV fleet: some 18,500 vehicles(estimated
RV valuations = £85-100m)
Head of team: Steve Crawshaw, general manager for
LCVs
No. of executives in team: 60
Contacts: 0845 230 0055/ fleetline@leaseplan.co.uk
Lombard Vehicle Management (LVM)
Size of LCV fleet: around 25,000
Head of team: Wayne Millward, operations
manager
No. of executives in team: five dedicated van unit staff, supported
by specialists and consultants among a total staff of 420
Contacts: 0121 566 0900/ wayne.millward@lombard.co.uk
, vanteam@lombard.co.uk
Lloyds TSB autolease
Size of fleet: 24,300
Head of team: Graham Neagus, head of specialist commercial
vehicle unit (SCVU)
No. of executives in team: 13
Contacts: 0870 850 0977
GE TIP
Size of fleet: 11,500 HGV trailers
Head of team: Damien Wall, Marketing Director, GE
Equipment Services
No. of executives in team 18
Contacts: 07775 821519 damien.wall@ge.com
Vehicle servicing
Vehicle servicing arrangements under contract hire take a
variety of forms. “Among Leaseplan’s customers we have servicing
provided by both franchised and independent dealer networks,” says
Steve Crawshaw, general manager for LCVs at Leaseplan
UK.
“We also use a courier type network for out-of-hours support
using self-employed mechanics. Some of our larger customers have
their own in-house facilities, but they too find attractions in
contract hire deals where the lessor shares in the risks and
rewards in maintenance.”
Lombard also has customers with in-house servicing, though
Millward notes: “The trend these days is for vehicle operators to
outsource for the purpose of cost savings. We utilise our network
of approved providers where we have specified service levels in
place, and also control over the quality of the provider and agreed
costings.”
In terms of equipment supply, vehicle contract hire is
principally a point-of-sale leasing product. In Leasplan’s case,
for example, some 60 per cent of CV contract hire business is
introduced through manufacturers’ networks, and the remainder
through independent dealerships.
On the HGV side, Damien Wall, marketing director of GE TIP,
comments: “We deal direct with trailer manufacturers for all
requirements. This includes pan-European suppliers such as Schmitz
and Krone, but also UK-based one like Dennison and SDC.”
The HGV angle
HGV operators see increasing attractions in the contract hire
product. “Logistics companies operate under tight margins and find
it difficult to raise capital. Contract hire makes their budgeting
far simpler in terms of both vehicle finance and servicing,” says
Robin Mackonochie, head of communications at the British
Vehicle Rental and Leasing Association (BVRLA).
Wall comments: “Volumes in the trailer market are currently
limited by constraints on supplies of components, particularly
axles, flooring and tyres. The transport/ logistics sector
continues to be competitive in terms of rate and margin, but recent
increases in the prices of raw materials and components are pushing
overall costs up.”
Some of the long established players in the LCV contract hire
market, such as Lombard and Leaseplan, are beginning to make moves
into HGVs, or at least considering this. Millward says: “As part of
our commitment to being a flexible solutions provider, we do fund
heavier vehicles for car and van customers who specifically request
it. We are in the process of providing car transporters for Just
Car Clinics, a leading bodyshop network, and this year we have
funded sideback recovery vehicles for the AA.”
Across the CV market the outlook for residual values (RVs) seems
very positive. On the LCV side, Millward comments: “The trend this
year has been strong and we believe this should continue into early
2008. The demand for good used stock has been strengthened by
supply issues that were affecting some key manufacturers. This
caused many customers to extend their fleet contracts. Managing RV
risk is also about making sure you have the right mix available at
auction.”
Anticipating laws
Crawshaw stresses that vehicle enhancements by contract hire
players can help to manage RV risk. “We find that anticipating
regulatory changes, by adding tachographs and ABS facilities to
certain categories of vehicles before they are required by law,
underpins RVs as well as giving added value to the lessee,” he
says. In respect of HGVs, Wall comments that “current RVs are
strong as a result of limited availability of new replacement and
incremental trailers”.
At times in the past contract hire customers have experienced
unexpected charges at the end of contract hire terms through
contractual return conditions. Across the industry, lessors have
been attempting to respond to their customers’ concerns in this
area, while continuing to protect their essential interests.
Mackonochie says: “New BVRLA guidance on return conditions, issued
in May this year, seeks to allay customer concerns about return
conditions. It should be clear that vehicles are not expected to
come back in pristine condition after two or three years of use,
but nor should customers expect to avoid penalties where they are
returned in exceptionally poor shape. The fair and reasonable
criterion is paramount.”
A management consultant in the UK automotive fleet market, Colin
Tourick, feels that contract hire players, based in the financial
sector, are becoming being better attuned to CV users’
requirements. “A notable feature of the past few years is the
number of lessors who have recruited LCV specialists. In the past a
van fleet customer would have had to deal with an account manager
whose experience was mainly with car fleets. Now it is normal for
them to deal with people who understand vans and speak their
language.” Contract hire, it seems, is playing an important role in
making commercial vehicle leasing more attractive to customers.
