The seismic impact of the Covid-19 pandemic, allied to the transition to electric, means businesses are embarking on a fundamental change in the way they fund their vehicles, ARI, one of the UK’s largest independent funding and fleet management providers, has found.
With employees working from home, meetings held remotely and many operations now running digitally, has found businesses are questioning their current vehicle provision and established funding contracts, which may not be fit for purpose on the other side of the pandemic.
As a result, there has been a marked rise in the number of fleets looking for flexible leasing options: as well as offering multibid leasing system for contract hire, ARI offers finance lease and has seen an 80 per cent rise in enquiries for its FlexLease finance lease product over the past 12 months and has doubled the size of its finance leased fleet in the UK in the past year.
FlexLease has no end-of-contract mileage charges and allows the fleet, not the leasing provider, to determine when they defleet vehicles by combining real time data, online dashboards and finance lease funding.
“The issue is that mileages have been severely reduced across almost all fleets, and many businesses have kept going without needing to be on the road as much,” says ARI MD Nick Caller. “Or, certain fleet vehicles such as delivery or last mile are doing many more miles, while company car mileage in the same business has dropped markedly. The result is a widening disparity in the usage profile of a fleet, and one funding method is unlikely to cover all eventualities.
“Many customers have asked the question: what is the next five years going to look like for us? We still need vehicles, but the pandemic has proved there are lots of different ways of doing things that may be more time- and cost-efficient. So why are we paying fixed contract hire rates and maintenance packages for a service we no longer need as much? In many closed-end leasing contracts, charges and margins can make up more than 15% of overall cost of ownership.”
FlexLease allows companies to improve their cashflow while the assets stay on the balance sheet. Finance lease as a funding solution is not new, but ARI’s application of it in FlexLease is, because it uses highly accurate reporting technology and ‘marginal gain’ insights to create bespoke packages for every customer.
“Contract hire undoubtedly served a purpose historically. But with legislation changes and the advent of electrification, all bets are off and companies will be spending the next few years learning again how they will use their fleets. So they need more agile leasing products that can adapt to changing circumstances and suit how they use their vehicles – not how it suits their leasing provider,” says Caller.
“This type of disruptive new product, possible by marrying technology and funding, allows customers to see and understand in real time all their costs throughout the lifecycle of the vehicles, and benefit from perfectly timed strategic decisions that maximise the return on their investment.”
With FlexLease, resale value, the asset and associated debt are shown on the fleet’s balance sheet, and the vast majority of the agreed value of the vehicle is paid over the rental term. Once paid, fleets can opt to carry on leasing the vehicle on a lower rental. Alternatively, the vehicle can be sold, in which case 100% of the sale’s net profit is returned to the customer.
Owned by the New Jersey-based Holman Group, in the USA, ARI funds more than 250,000 vehicles through finance lease.