February 2009 - NEW GOVERNMENT SURVEY UNDERLINES HOW MOST COMPANIES CAN RAISE RECESSION-BEATING CASH BY TURNING TO RENTAL
Thousands of cash-starved small, medium and large companies across the UK could help themselves fight recession by moving away from vehicle ownership and opting to hire instead.
The preliminary findings of a Department for Transport survey of van activity in England reveals that only 12% of light commercial vehicles are currently leased or hired with the remainder owned by businesses and private individuals.
With around 3.2 million sub 3.5 tonne light commercial vehicles registered in Britain, Northgate Vehicle Hire, the country's largest vehicle rental company, says businesses that presently purchase vehicles need to appreciate that they can free-up much needed working capital by turning to rental through a 'sale and rentback'.
Northgate Managing Director Phil Moorhouse said: "Many companies have been hit by the economic downturn. They are struggling to obtain credit and are under pressure from their banks to reduce borrowings.
"For many of the businesses that continue to own their vans, rental would be a significantly more flexible and cost effective alternative."
By turning to rental through 'sale and rentback' fleet owners can turn a depreciating asset into cash, which can then be used as a new source of working capital.
And, unlike contract hire or other forms of leasing, hiring through Northgate's NORFLEX solution does not tie businesses into the commitment of a long-term contract with the threat of penalty charges if terms of the contract are breached.
Mr Moorhouse said: "With the UK economy entering recession and jobs being lost across most sectors the economy, it is imperative that companies analyse all their costs. Operating a fleet of vehicles for some businesses is typically the second highest cost after staff.
"Therefore, fleet costs should be under the microscope as companies look to save money and reduce their risks. Businesses that have always purchased and owned vehicles are failing to appreciate the cash-saving potential of rental especially in today's economic climate."
"All fleets, irrespective of size, should view renting with NORFLEX as an alternative vehicle acquisition route that compares favourably with leasing or contract hire. It is extremely price competitive in comparison with other methods of acquisition, particularly when you consider there is no long term funding commitment and businesses are able to eliminate the risks of ownership. This flexibility is even more important with the economy going into recession and the uncertainty that this brings in terms of future business prospects. As vehicle demand increases or reduces, companies can immediately alter the size of their fleet without fear of breaking any contracts."
Most of the vehicles on Northgate's 68,500-strong fleet (largely made up of LCVs) are less than about 24 months old with the servicing and maintenance being undertaken by the company's UK-wide network of workshops in accordance with manufacturer recommendations and standards.
With the Department for Transport survey revealing that 53% of vans operated being purchased secondhand, particularly by private operators, renting via Northgate guarantees that company drivers will be at the wheel of vans that are among the most modern available fitted with the latest safety features and powered by the most emission-friendly engines.
Mr Moorhouse concluded: "We need to convince more organisations of the benefits of flexible rental and to focus them on the idea of vehicle usership and not ownership. Flexible, contract-free rental solutions like NORFLEX remove the burden of having cash tied up in a depreciating asset and is the smart move for forward-thinking businesses."
The preliminary Department for Transport survey results can be found at http://www.dft.gov.uk/pgr/statistics/datatablespublications/freight/vanactivitybaseline08/. A final report will be published later in 2009.
