Leasing firms coming under pressure to renegotiate agreement terms
The research by Creditsafe, a leading supplier of online business credit reports, found that nearly two-thirds (65%) of operators report customers attempting to amend the terms of their original contractual agreements in the last 12 months.
The main reasons for renegotiation were to amend the length of the lease agreement or extend the contract mileage.
Creditsafe also reported that leasing firms have increasingly becoming victims of late or defaulted payments in the last 12 months. Over three quarters (76%) of dedicated car leasing firms have witnessed an increase in payment issues with almost a third (32%) of companies losing money in this period as a result of clients entering insolvency or declaring bankruptcy.
Chris Robertson, UK managing director Creditsafe, said: ‘While the car leasing market remains buoyant, firms are still incurring avoidable losses. Customers’ financial circumstances can change very quickly and it is important leasing firms track the ongoing viability of customers to meet their financial obligations on a regular basis. Asset recovery can be a time consuming and expensive process, so it is often better to contact customers identified as “at risk” proactively to address the situation.’
Robertson continued: ‘With many organisations struggling to justify the upfront capital outlay of vehicle fleet purchase and with access to financing still relatively tight, particularly in the small business sector, leasing offers an attractive alternative. As the economy picks up steam and demand rises further leasing operators will need to invest sufficient resource in credit risk management to try and drive down the unacceptably high levels of losses.’