AN increasingly cautious mood will lead to an upturn in demand for medium term rental. Businesses will want to hedge their bets against what appears to be a challenging year.
At least that’s the opinion of Phil Jerome, managing director of Meridian Vehicle Solutions – a supplier of short-term leases.
A growing mood of caution among businesses is likely to lead to a boost in demand for medium term rental during 2017.
These flexible arrangements will suit an economic environment that is uncertain, says Jerome.
He explained: “The effects of Brexit are so difficult to forecast that the majority of businesses are adopting a wait-and-see approach to this year, something that is likely to affect all kinds of areas from capital investment to recruitment.
“What medium-term rental offers against this backdrop is a flexible solution for companies that don’t want to enter into longer-term arrangements. If you are recruiting someone and need a car for their probation period, for example, or if you are employing someone on a fixed term contract, then it is a very viable product.
“Especially, in most cases, the monthly cost of medium term rental of between one-six months is only marginally higher than a traditional three year/60,000 mile contract.”
The British Chambers of Commerce head of economics, Suren Thiru, certainly believes caution is the watchword even if the end of the 2016 coincided with a raft of economic data highlighting the resilience of the UK economy in the wake of the EU referendum.
“There remains a high degree of uncertainty over the near-term outlook for UK growth, the recent resilience in UK growth is expected to weaken. Higher inflation and continued speculation over Brexit will weigh on the UK’s growth prospects, with consumer spending and business investment likely to be hardest hit,” he said. Adding: “The escalating burden of up-front taxes and costs faced by businesses is also likely to soften investment intentions.”
Nevertheless, Thiru expected the economy to grow, even if was by a lower rate of 1.1%.
Certainly the days of either a fixed term lease or daily rental have passed – and brokers should consider how they might adapt to businesses wanting more flexible short-term lease products.
Phil said that there was general movement in the rental and leasing market away from traditional leasing products towards a wider range of solutions.
“You don’t have to look back too many years to find a time when the choice was basically between a three-year lease and daily rental. Now that is no longer the case.
“We have gradually shifted into a more sophisticated model where a wider range of suppliers have created a wider range of provision, offering different lengths of hires and leases across a wider range of vehicles. All of this can only be good for fleets.
“Meridian Vehicle Solutions is a brand new vehicle rental concept focusing solely on the demand for long term rental vehicles that sit between conventional short term daily hire (up to 28 days) and long term contract hire (2-4 years).
“We have created a differentiated product for our target corporate customer base. Our customers can choose from a range of models in a variety of specifications and a choice of colours.
“We also supply cars into the rental market, providing an alternative source of supply and credit for those rental companies that wish to supplement existing supply lines with alternative sources of cars at attractive prices.”