A new fleet funding option?
One of the few positives of the economic downturn is the availability of low interest finance. In theory there’s never been a better time to buy big ticket items, although in practice banks are still nervous about lending, a nervousness which will not be helped by the recession slipping into a double-dip.
One area where cheap finance is readily available, and being used by consumers, is in the purchase of cars.
The Finance & Leasing Association (FLA) has reported an increase in dealer finance sales over recent months. Even allowing for the high number of zero and low interest deals being promoted by car manufacturers to stimulate demand, there is a noticeable trend towards private car buyers – no doubt frustrated by the parsimonious attitude of their banks – to fund new cars through their local dealerships.
According to Paul Harrison, FLA’s head of Motor Finance, the ability of dealers to tailor the finance they offer, and to offer it at low rates, has meant that the proportion of cars bought using finance from the dealership has grown from around 47% two years ago to almost 65% now.
Finance has always been an important part of a dealers’ arsenal but until the downturn they lost a high percentage of deals to banks and online lenders, with many customers walking into showrooms with their funding already in place.
For staff taking cash allowances in lieu of cars there are some good showroom deals around on new cars funded through PCP schemes. This could also fit neatly with duty of care procedures as staff will be buying vehicles which will be regularly serviced to maintain their warranties. Employees, however, will need to make sure their combined business and personal mileages are in line with the limits set by PCP schemes; this could be a deal breaker for high usage drivers.
A number of car brands are targeting local businesses and have encouraged their dealers to recruit local fleet specialists who understand the nuances of fleet funding. While some of the bigger dealer groups, notably Pendragon, JCT600 and Marshall Motors, run their own fleet funding operations enabling them to provide local businesses with a single point for acquisition, funding, SMR and disposal.
So are there any opportunities for fleets, especially those run by SMEs, to benefit from the availability of locally available cheap finance?
Julie Jenner, chairman of the Association of Car Fleet Operators (ACFO), acknowldges dealer offerings have improved but believes the traditional way is still the best.
‘Manufacturers have gone out of their way to make it clear to SMEs that they will do business direct through their dealers, but there are also many leasing companies, some running several thousand vehicles, who are totally geared up to handling business from smaller organisations.
‘In my experience, the average fleet sales person in a dealership often does not have the same level of knowledge and understanding of fleet financial implications as leasing company employees,’ she said.
However, Steve Whitmarsh, managing director of specialist SME fleet provider Run Your Fleet, believes dealers can play a role in the sourcing of funding but urged fleets to use a broker to get the best possible deal.
‘The only way a business can be sure they are getting the very best finance deal is to get a number of quotes from a number of sources – or use a reputable, experienced broker to do the job on your behalf.'
While dealers will never challenge traditional finance providers, they do offer a useful alternative and their appropriateness is down to how well they can cater for your specific needs.