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Demand for short-term subscription leasing to continue rising

More fleets are likely to move to short-term subscription-based car leasing for perk cars as ongoing business uncertainty and changing employee demands turn operators away from traditional three and four-year leasing contracts.

Tony Donnelly, chief executive, Goodwood Corporate Mobility

That’s the view of Tony Donnelly, chief executive of Goodwood Corporate Mobility, parent company of GoodLease, who believes demand for company cars on contract lengths up to 12 months is set to accelerate.

Donnelly pointed out that leasing demand is already being hit by the rising year-on-year burden of Benefit-in-Kind tax and future uncertainty over tax levels as drivers instead opt for cash allowances. His comments are backed up by latest quarterly leasing figures from the BVRLA, which show that in Q3 2018, business car leasing fell 7.2% while personal contracts continued to rise with a 19% increase, furthering a trend seen since 2016.

And Donnelly said a range of other factors supported short to medium-term demand for subscription-based leasing, including Brexit uncertainty, a general lack of business confidence, the arrival of the millennial generation in the workplace, and falling new car sales.

Donnelly continued: “Fuelled by a wealth of fleet industry and business uncertainty, corporates are learning that they can hire quality cars for periods of up to 12 months and sometimes longer on the same [price] terms as they can get a 36/48 month lease.

“Add in to the fact that, particularly in major conurbations, traffic congestion, parking and the introduction of clean air zones are all making car ownership more difficult and it is not impossible to see that demand for car usage paid for using methods that are proven in other sectors of the economy could become acceptable and popular in the traditional perk company car sector.”

He added that rising Mobility-as-a-Service (MaaS) considerations were also having an impact.

He concluded: “Corporate uncertainty fuels a requirement for business flexibility and that means employers must be nimble and have the capability to react quickly to changing circumstances so there is a reticence to sign long-term contracts, particularly in non-core markets and that means in the supply of perk company cars.

“A subscription car service allied to a pay-on-use model will not be suitable for every business and every perk company car driver, but it will work for many. In return for a monthly fee, an employee would have access to whatever vehicle they required whenever they wanted it. That could include, for example, a small car during the week and a lifestyle 4×4 vehicle at weekends with any additional costs met via a trade-up, pay-up facility.”

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Natalie Middleton

Natalie has worked as a fleet journalist for nearly 20 years, previously as assistant editor on the former Company Car magazine before joining Fleet World in 2006. Prior to this, she worked on a range of B2B titles, including Insurance Age and Insurance Day.