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External risk factors work in favour of car leasing

UNCERTAINTY caused by factors such as Brexit, and the new car market’s shift away from diesel, are combining to increase the attractiveness of leasing to businesses and individuals more than ever before believes Arval.

The vehicle funding and fleet management specialist says that the fixed cost of leasing, and the fact that the user never owns the vehicle, removed major financial worries hanging over companies that still bought their own cars and vans.

Shaun Sadlier, head of consultancy, said:

“Our view is that there has probably never been a more persuasive argument for leasing vehicles than the situation that currently exists.

“We are at a point in time where there are significant risk factors hanging over vehicle values in the future. The potential impact of Brexit on the wider economy, which remains an unknown, will be hanging over us for quite some time to come.

“Equally important, if not more so, is the developing fuel situation. We have seen quite a sudden shift away from diesel in the overall new car market, if not to the same extent in fleet. It is difficult to say how this trend will develop. How will the public view diesels, petrols and hybrids in three or four years, and how will this affect their values?”

Arval's Shaun SadlierShaun (pictured right) explained that these factors could be mitigated against on a fleet of the size of Arval’s but for almost every kind of business running their own vehicles, represented a risk.

“It is no revelation for us to say that forecasting future values is very difficult even for a company like ourselves at the moment, even though we are able to spread the risk over many different types of vehicle. For a business buying five, a hundred or even a thousand cars or vans, the same kind of kind of reduction of risk is simply not possible. Of course, for consumers looking for a private lease, it’s impossible.”

An additional factor, Shaun said, was that businesses could not begin to match the buying power of the largest leasing companies for everything from vehicle acquisition to service, maintenance and repair.

“This is very much another factor in favour of leasing. We are able to lever our increasing size to gain pricing and service standards that even large independent businesses can never hope to match, and which are very different from those available to the general market.”

Shaun said that Arval’s sales teams were reporting that there was some realisation of these factors in the market.

“There has, of course, been a long term shift towards leasing over many years but this has not been uniform and, in periods of economic uncertainty, there have been noticeable jumps. It could be that we are at another of those moments.”

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