Difficult economic conditions make a compelling case for Contract Hire
The annual fleet barometer, supported by vehicle leasing and fleet management company Arval, looked at the state of the market across 16 countries with more than 4,800 interviews conducted with fleet decision makers earlier this year. The majority of the fleet professionals surveyed expect vehicle resale values to fall this year and fleet professionals in the UK are generally more pessimistic in their outlook than their counterparts in other European countries.
This view comes as no surprise with economic conditions remaining difficult but also reinforces the case for fleets to turn to Contract Hire. Removing a company’s exposure to the risk of selling vehicles on the second hand market, it replaces this exposure with a fixed monthly cost for their vehicles.
Indeed, the research shows that fleet professionals at larger companies (100+ employees) intend to develop the use of Contract Hire at a stronger rate than other finance options. A move that is likely to have been influenced by current economic conditions.
When specifically asked what motivated them to select Contract Hire as a funding method, the top responses amongst fleet professionals in the UK were:
The certainty of a fixed monthly cost
The opportunity to include servicing and therefore reduce exposure to variable costs
To avoid risk on the resale of vehicles.
Mike Waters, Senior Insight & Consultancy Manager at Arval commented:'These are clearly things that provide benefit to companies at any time, but often take on even greater significance during an economic downturn when as the research shows, cost pressures are at their peak and organisations crave stability.
'The risk of the second hand vehicle market is a major reason why organisations opt for operational leasing packages rather that purchasing vehicles themselves. In recent years the used vehicle market has been volatile and we have seen significant fluctuations in used vehicle values,' he added.
'For companies of all sizes, Contract Hire is a smart option to take because of the stability and certainty that it provides,' he concluded.