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Shaun Sadlier's blog: Trend towards leasing continues

Date: 28 August 2018

One of the more unsurprising aspects of the Corporate Vehicle Observatory research we have just carried out at Arval is that it continues to show a long-term switch away from outright purchase towards leasing. 

In 2018, 33% of businesses are choosing contract hire as their main method of fleet acquisition, compared with 31% last year. Overall, it is now used by 55% of large companies (50+ vehicles), 39% of medium companies (10-49 vehicles) and 21% of small businesses (1-9 vehicles).

The fact is that, at this particular point in time, it is difficult to understand why organisations of any size are still buying cars, except for a few in very particular circumstances. When we sit down with fleets, we are strongly promoting the view that there has probably never been a more persuasive argument for leasing vehicles than the situation that currently exists.

Why? Well, there are large unknowns in terms of macroeconomic risk factors like Brexit. Then, there is the fuel situation, with the sudden shift away from diesel towards petrols and hybrids. Finally, there are legislative factors such as WLTP and clean air zones. Over the next few years, all of these could have quite substantial impacts on vehicle demand, and therefore depreciation, in ways that are difficult to predict. The question that outright purchase fleets need to answer is whether it is worth taking the risk?

It is no revelation to say that forecasting residual 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, 100 or even 1,000 cars or vans, the same kind of risk management is simply not possible. 

We see evidence in the market that there is a realisation of these facts on an almost month-by-month basis, and next year it would be unsurprising if the Corporate Vehicle Observatory recorded an even more dramatic shift towards leasing.

Shaun Sadlier is head of consulting at Arval



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