Demand for light commercial vehicles is going through the roof.
Andy Thompson finds out why, and whether the upturn will
continue
There is no doubt that UK demand for light commercial vehicles
(LCVs), and their financing facilities, is strong. For instance,
Wayne Millward, operations manager of Lombard Vehicle Management,
reported that sales at his business have increased 40 per cent over
the past three years.
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Indeed, demand is so strong currently as to create capacity
problems in the supply chain. “Certain manufacturers have had
supply issues over the past few months, and this has affected our
ability to meet customers’ orders,” said Jon Walden, managing
director of Lex. “In some cases we have simply extended their hire
contracts until the new vans are ready for delivery.”
The continuing strong trend of the UK economy is undoubtedly a
major factor in overall demand. Some players also see a trend
towards customers downsizing their specifications and, where
possible, using LCVs in place of heavy goods vehicles.
Indeed, Walden commented: “As more safety and emissions
regulations are introduced for vehicles in the range between 3.5
and 7.5 tonnes, companies are downsizing their vehicles to avoid
these complications. The EU Working Time Directive restricts
driving hours on any vehicle fitted with a tachograph. So fleets
are looking to run more smaller vehicles.”
Steve Crawshaw, LCV manager at Leaseplan, agreed. “As well as
the additional driving test for vehicles above 3.5 tonnes, the
Vehicle & Operator Service Agency (VOSA) now applies intensive
licensing rules for the larger vehicles. All of this drives
downsizing into the LCV class.”
He added that a similar trend is occurring among builders in the
home improvement trade.
“A few years ago many of them would have used heavy trucks so as
to carry bulk building materials,” he commented.
“Now they tend to arrange delivery of these materials
separately, and for their own transport they have switched to LCVs.
Some of the latest 3.5 tonne models are larger in volume and carry
more payload than earlier ones.”
In addition, contract hire lessors who work in partnership with
dealer networks are sometimes closely involved in developing
vehicle adaptations that suit the demands of large numbers of
users.
In July this year Lex teamed up with specialist vehicle
suppliers, Clarks, of Doncaster, to adapt 133 Ford Transit Hi Roof
vans into specialist mobile office and messing units. They were
incorporated within a fleet of 400 vehicles leased to Network Rail
for its railway track maintenance operation.
Also, in July, Lombard
leased a fleet of 750 roadside assistance and recovery vehicles to
the AA, in specially fitted-out versions of models produced by
three manufacturers.
Working with a range of vehicle body and parts suppliers,
Lloyds
TSB Autolease last year broke new ground with an adaptation of
the Land Rover Defender to carry a payload above a metric tonne. A
fleet of these Optimised Special Capacity All-terrain Range
(OSCAR4) vehicles was supplied to the Central Networks power
utility as an “office and toolbox” solution for overhead power line
maintenance.
Most LCV finance deals are on either contract hire or finance
lease terms. However, HP facilities are also in use, mainly among
smaller fleets using point-of-sale finance. Hire periods usually
run for three to four years.
Crawshaw said: “High mileage users still go for three year
leases, but many others are now preferring four year periods. Where
vehicles have highly specialised fitments and adaptations,
customers prefer to keep them longer.”
Some daily rental companies are now offering customers extended
rental terms for up to 12 months. While not competitive on periodic
rental rates with longer term leases for three years or more, they
do offer a flexible alternative.
Potential Finance Group is one provider with a foot in both
camps. “We have some 350 vehicles let on our flexi-hire terms for
up to 12 months, and another 200 on traditional asset finance deals
for three to four years,” said Potential’s group managing director,
Colin Swanston.
The outlook for residual values in LCVs seems very healthy. “In
current economic conditions there is good demand for vans between
two and four years old,” said Walden. “Over the past three years,
the used van market has stayed buoyant even in seasons of the year
when it would normally be weaker.”
Crawshaw pointed out that a lessor’s expertise on RVs can help
customers to keep down their own costs.
“Thinking about how the market for used vehicles will look in
the future is particularly pertinent for LCVs,” he said.
“Users who purchase outright can find themselves with a fleet
that is difficult to sell when the time comes to renew. A lease can
be better value if the lessor is better able to maximise RV.
“Customers are beginning to make more use of leasing for
vehicles, so as to deploy more of their own capital in areas like
IT equipment.”
Some of the major players
Lex
Size of LCV fleet: 40,000
Method of introduction: dealer networks
Head of team: Jon Walden, managing director
Contacts: 0870 112 4000/ marketing@lex.co.uk
Leaseplan UK
Size of LCV fleet: 29,400 (comprising over 18,000 on contract hire,
and 11,000 on other leases)
Annual new business: 9,500 vehicles (£130m)
Method of introduction: direct with customers or through
brokers
Head of team: Steve Crawshaw, LCV manager
No. of executives in team: 40 covering all vehicles (a quarter of
which are LCVs)
Contacts: 0845 230 0055/ fleetline@leaseplan.co.uk
Lombard Vehicle Management
Size of LCV fleet: around 25,000
Head of team: Wayne Millward, operations manager
Contacts: 0121 566 0900/ 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
