BC50: Year of change for top lease firms

It’s all change at the top for the UK’s biggest leasing companies with losses, gains and consolidations aplenty. Jack Carfrae reveals the state of the market for the 50 largest contract hire businesses.

If fleet operators had shut their eyes and covered their ears in the past year they could be forgiven for baulking at the positions and sizes of the country’s top 10 leasing companies.

While the top pair – Lex Autolease and Leaseplan – have remained the same, things are different further down. The biggest single change in 2012 is the appearance of Alphabet in third place, following the BMW-owned firm’s acquisition of ING Car Lease, which itself was in eighth spot in 2011.

Arval, which occupied third place last year, has been relegated to fourth despite remaining almost completely constant in terms of the numbers of vehicles on its books.

Commenting on life after the merger, Alphabet CEO Richard Schooling says: “This year has not just been about stability; we have also grown our overall customer portfolio by more than 10%. We have expanded channels such as public sector and commercial vehicles, as well as investing in the areas where the brand is already strong.”

Absent from this year’s top 10 is Lombard Vehicle Management, which, as reported by BusinessCar in February, exited the leasing market following parent firm Royal Bank of Scotland’s restructure.ALD signed a five-year ‘white label’ contract with RBS at the time of the announcement, which sees it gradually taking on around 30,000 former LVM contracts as and when they come up for renewal. Despite the takeover and transfer of the business, the Lombard name remains on the renewed contracts.

Consequently, ALD’s numbers leapt by 16,770 compared with last year.

While it’s snapping at the heels of Arval for fourth place, that’s still not enough to place it any higher as Alphabet’s parc has now more than doubled.

The absence of both ING and LVM within the top 10 has given many companies a leg-up in this year’s BC50, as has the disappearance of Mercedes-Benz’s leasing operation from the upper echelons of the list (it was in ninth place last year).

The German firm still runs a leasing operation, but didn’t wish to be recognised as one of the largest in the UK and requested to be excluded from this year’s BC50.

“It was felt that with the merging of Mercedes-Benz Financial Services and Daimler Fleet Management in to one legal entity, it is no longer appropriate to submit to this survey,” it told BusinessCar.

Returning to the top of the table, Lex Autolease and Leaseplan are going about their business in different ways. The former reported significant reductions of 26,915 vehicles in 2011 and 11,978 this year – part of what managing director Rick Francis last year described as a deliberate downsizing policy to “exit non-profitable business”.

Second-place giant Leaseplan has, however, enjoyed modest but nonetheless commendable growth, adding 3915 vehicles to its portfolio this year. Ancillary sales and strategic marketing director Stuart Walker told BusinessCar that this was down to offering significant savings and showing clients how they had been achieved, surmising: “The actual rental part of running a fleet is now becoming a small part of the pie, as cost saving is becoming the key area.”

BusinessCar’s figures show that the overall leasing market is up by 6.5% in terms of volume, but the outlook for 2013 is more consolidation among leasing companies and a trading environment dominated by fears about the Eurozone, as Schooling suggests: “Looking to the market as a whole, we expect to see further consolidation, especially among some of the medium-size players where affordable liquidity is still a challenge. The economic decisions made by European governments over the coming months are likely to trickle down and impact the fleet management sector and the eventual fallout could be significant.”

Arval’s managing director, Bart Beckers, remains cautious about the year to come, claiming that leasing firms will need to be flexible with their methods of business in order to stay afloat: “Managing vehicle fleets in a volatile market environment with further regulation changes to come will stretch the business model for operational leasing providers, and the companies that respond effectively to this will remain at the fore.

“Businesses of all sizes have come under increasing cost pressure in 2012. They are tasked with delivering an effective vehicle fleet at the same time as driving operational efficiency.”

ALD, which has enjoyed what it describes as “a good year”, is optimistic about the future and intends to be level-pegging with Alphabet with a parc the right side of 100,000 within two years. Managing director Keith Allen comments: “Business confidence has been shaken badly in the last four years and it will take time for this to be restored. This will undoubtedly have an impact on the corporate market with inevitable moratoriums on new car orders for many – or contract extensions – and redundancies, restructuring, company disposals, etc for others.

“However, I feel that we are past the worst of the recession and confidence is returning, albeit slowly,” he concludes.

Leaseplan: Combinations and savings the recipe for success

Leaseplan’s modest but reassuring growth over the past year has seen it increase its number of vehicles by 3915 to a total of 134,115, securing it a comfortable second place in the 2012 BC50.

Stuart Walker, ancillary sales and strategic marketing director, puts the firm’s growth down to delivering cost savings, which he claims are now more important than the lease arrangement itself: “We issue value statements to our clients every year, which show clients how much they save. It’s worked out to £51 million across 358 customers this year. The actual rental part of running a fleet is now becoming a small part of the pie, as cost saving is becoming the key area.

“It’s about looking at different ways of managing fleets for the most efficient outcome – combinations of daily rental and pool vehicles etc. Another thing we’re looking at more is data. The trend is for ‘big data’, which is how you analyse trends across a series of data sources – and applying that to managing a fleet.
“There was the dip in 2008 and 2009, but actually registrations have recovered quite strongly since then. The key question for 2013 is ‘what’s going to happen in the Euro arena?’ The UK currently seems reasonably well positioned from that viewpoint with relatively favourable exchange rates and so on. From that perspective you’d expect a relatively buoyant fleet market in 2013.”

Speaking about opportunities for further growth, Walker said Leaseplan had no ambitions to become the number one leasing company in the UK, saying: “The fleet growth that we’re achieving is proof that we’re doing a lot of things right. Size isn’t everything and we’re quite happy with the rate of growth that we’re at.”

Orders are up but numbers are down at Lex Autolease

Despite the company’s gradual reduction in numbers, number one leasing giant Lex Autolease saw an increase in orders and deliveries at the start of the year, as managing director Rick Francis explains:

“Over the past few years, contract extensions have become the norm, but eventually those ageing fleets will need replacing and we are seeing major signals that this behaviour is occurring. Our orders and deliveries in the first half of the year were up 20%, while our total customer fleet size has fallen back marginally – much in line with the fleet sector as a whole.

This paints a picture of a market that is actually operating in a sensible fashion – upscaling and downscaling to meet the economic conditions of the day.

We, along with others in the market, have consistently extolled the virtues of an effective, policy-driven, cost controlled, fleet strategy. Five years since the credit crunch hit, we are now witnessing that more clients are beginning to talk our language, which means leasing companies and fleet operators are now working towards the same objectives – irrespective of fleet size.”