Under the Microscope: We talk to BVRLA chief executive, Gerry Keaney
28 April 2017
Author: Debbie Wood
The vehicle leasing and rental industry plays an integral role in helping keep Britain moving, and instrumental to the operations of this business is the British Vehicle Rental and Leasing Association (BVRLA), one the oldest and most respected trade organisations here in the UK.
Since its inception in 1967, the BVRLA has been helping its members, which operate a combined fleet of around 4.8 million cars, vans and trucks, deliver safe, sustainable and affordable road transport, while consulting with the Government on key issues to help drive industry standards.
On the back of what BVRLA chief executive Gerry Keaney describes as the association's best-ever year, there are big plans in place to see 2017 be even more successful, despite some challenging changes to tax and salary sacrifice.
Keaney and his team campaigned hard against the changes to Vehicle Excise Duty, which came into effect in April this year and is expected to increase the first-year VED bill for rental companies by 400%.
"The decision on the VED changes was made without any consultation and the Government has inflicted it on the industry," Keaney tells granitekitchen. "We don't think its fair or compatible with the objectives that they have set for improving air quality and it's going to cost rental members around £2m by not being able to claim refunds.
"The fact is we have to fill the gaps that exist between expenditure and income but there are smarter and cleverer ways of doing it and it does show a lack of joined-up thinking at a governmental level in terms of cleaning up air quality and putting safer cars on the road."
The BVRLA worked closely with the leasing sector in formulating its response to the salary sacrifice changes and has mixed feelings about the end result. Keaney believes the association reacted well in indentifying the role salary sacrifice has to play in the uptake of low-emission vehicles and supporting staff retention, but the Government could have done more to understand the benefits to the scheme.
"On one level we were disappointed with the outcome of the changes. We felt the Government didn't really want to understand the message we had or the role that salary sacrifice has to play," he says. "But on the other hand we were relatively pleased as we got some clarity and its created a level playing field. There were always some question marks about salary sacrifice as a product and those have been answered now and it is well understood.
"Once the certainty was in place, our members have been very successful in switching the tap back on and writing new business. In reality, for a number of key vehicles it didn't make a big difference either."
Members cautious about residuals
The leasing and rental industry plays a vital role in helping to get more low-emission vehicles on the road, primarily because of the significant volume of new vehicles it creates. On average, a rental vehicle is replaced every nine months, and every 36-40 months for a lease car. These vehicles feed into the used car market, which continues to be buoyant despite volumes entering the market being on the increase.
According to Keaney, members remain cautious but optimistic about the performance of the used car market and, because the industry has got smarter and more sophisticated over recent years, he is confident that members will be well prepared when a downturn in values inevitably comes.
"I think the used car market in the UK is the most sophisticated in the world," Keaney explains. "Preparation standards and confidence are now at such a level that we're seeing increasing numbers sold online. "I joined the BVRLA four years ago and when I joined, one of the first conversations I had with a member was in which month the used car values were going to start to go down. I think members are cautious because we all know these things work in cycles, but what has happened in the UK in the last 10 years is that dealers and manufacturers have got much better at recycling used cars."
Tackling grey fleet
One of the biggest stories to come out of the BVRLA last year was its Getting to Grips with Grey Fleet report, in collaboration with the Energy Savings Trust, which highlighted some key figures and insights into the scale of the grey fleet issue here in the UK. It's a subject the BVRLA feels very passionate about and, on the back of that report, has enabled the team to help its members approach customers to beginning tackling the issue head on.
"We felt there was a need for a real authoritative piece of research which looked in detail at what the grey fleet market was worth. It crystallised the issue but also provided a business opportunity for our members," Keaney explains.
As we've discussed previously, grey fleet isn't always bad if managed correctly, and Keaney believes different alternatives to operating grey fleet will work better for different companies. There is no silver bullet.
"Salary sacrifice is part of the answer, but if someone is driving 10,000 miles a year in a grey fleet vehicle, we will have a strong recommendation for that driver to be in a company car. There are also car clubs and short-term rental options which can be opportunities too."
Celebrating its 50th birthday this year, the BVRLA has grown from the six people meeting up in a London hotel for its first meeting in 1967, to the 900-plus members it holds today. Last year saw the association have its best-ever performance in terms of member numbers, political consultations and the number of events the organisation held. Keaney is looking to his team to build on this success in 2017.
"We want to do even more of what we did last year. 2016 was a record year for us in almost every metric that we look at in the business and our visibility and credibility with Government officials has never been at a higher level," Keaney says. "What I feel particularly proud about is that the understanding of our organisation and how we can help and be an enabler for strategic ambitions is finally being recognised by the Government. With the right armour and the right support, we can help them achieve things very quickly purely because of the churn of vehicles our industry creates."
Despite the number of individual companies, particularly those in the leasing business, in decline following a number of key recent mergers, the BVRLA's membership has grown to be over 900. A large part of this growth has been from brokers, who generate business with SMEs on behalf of major funders, and at the end of last year the BVRLA had over 300 broker members on its books.
More growth is expected from brokers in 2017 and Keaney believes there are still around 750-800 rental operators in the UK that are not members. The BVRLA will be looking to get more of them to come on board over the course of the year.
"We're working very hard to expand our influence in the independent rental sector and we are encouraged to do that by regulators. They would like to see more operators sign up to the BVRLA code of conduct.
"If you're in the BVRLA you can get the halo effect. It's a badge of conduct and quality, because the members are supported with training, governance, a code of conduct, all of which are quality standards," Keaney concludes. "As we move forwards we need to start expanding to offer services for our increasing number of broker members while continuing to influence key transport Government decisions. It's going to be a very big year for the BVRLA."