Sale, Manchester, 7 April 2011: Use of outright purchase as a method of acquiring company cars and vans may have fallen by more than half in the last 18 months, according to the latest quarterly Company Car Trends survey from GE Capital.
The research, which surveys 300 fleet decision makers, reveals that just 17% of respondents are using outright purchase today, compared to 38% just 18 months ago. Conversely, leasing appears to be making gains. In the same time period, the use of contract hire has risen from 42% to 66%.
Interestingly, use of contract hire differs widely in use between essential company car users at 66% and those viewed as non-essential at 31%. For most other major acquisition methods, there is little difference between the two groups.
Gary Killeen, Fleet Services Commercial Director for GE Capital UK, said: "We are surprised by the strength of the trends revealed by our latest survey. Certainly, our general experience suggests that outright purchase has fallen in popularity since the recession and leasing has subsequently gained momentum, but we would like to see further research before confirming these dramatic swings.
"It must be noted that many of these fleets included in the survey will be using more than one acquisition method as part of their mix and so the research does not suggest that the total amount of vehicles on fleet that are outright purchase have halved, but rather refers to new vehicles registered today. However, the findings do suggest that there may potentially be a significant shift in thinking on the part of the respondents over time. It could be that this is an early indication of a change that sees leasing come to dominate fleet acquisition."
Killeen explained why leasing appeared to be gaining market share from outright purchase in the post-recessionary economy. "Outright purchase is a good option as an acquisition method when a company is cash rich or can borrow money cheaply and therefore more comfortable to carry the residual value risk on the vehicle. In the current economic climate, there are far fewer companies who can tick all these boxes."
"It is for broadly the same reasons that contract hire is increasing in popularity. Cars and vans can be acquired with minimum upfront outlay, monthly expenditure is fixed and determined in advance, and the potential burden of residual value risk is removed. Also, there are a number of other contributing factors such as the VAT rise, which makes leasing seem a better option."
"However, it is important to remember that making a decision between outright purchase and leasing is not always a straight choice. An attractive compromise for a number of companies are hybrid leases which combine the features of both outright purchase and leasing, and our fleet consultants are increasingly recommending this option when they meet the specific needs of customers."
Angela Goulding
GE Capital
[email protected]
0870-458-8421