Vehicle leasing on the rise as SMEs make first impressions count
5 min read
17 July 2015
Growing faster than any other advanced economy in the last year, the UK’s economic prospects are looking fairly rosy – at least for the time being – and in response, SMEs are making a charge for expansion to reap the rewards.
In preparing for growth, we’re seeing an increasing number of companies start to look at new, innovative ways to restructure their operations to precisely match their needs.
The management of company vehicles has become a key focus area for businesses to deliver this change, and as a result, we’ve seen leasing become an increasingly popular vehicle funding option for firms up and down the UK.
According to our data, 2014 saw a sharp rise in the number of vehicles leased to UK small and medium-sized businesses, growing 29 per cent year-on-year. However, the biggest growth was seen in firms that rely on commercial vehicles to operate, with the number of vans leased to SMEs climbing by 110 per cent year-on-year.
Customers turned off by poor appearances
So what’s driving this surge in van leasing? While buying a vehicle outright brings with it the pride of ownership, the traditional view is that running it into the ground is the best way to get value out of it. The van may still get the job done, but as the mileage clocks up its appearance will inevitably deteriorate. According to the Leasing Revolution report, published in December 2014, this approach may be losing SMEs customers.
According to the research – which surveyed 2,000 consumers from across the UK – businesses should not underestimate the importance of first impressions or risk losing clients due to their vans being in a poor condition of repair. The findings highlighted that nearly nine out of ten customers felt that businesses should take greater care in the appearance of their vans than they do now – a vehicle in poor condition would put off nearly two thirds from rehiring. Additionally, those surveyed made a direct relation between a vehicle’s condition and the quality of a firm’s goods or services, associating a van in bad shape with poor service and the potential to be “ripped off”.
For many businesses, solving the problem by buying new vehicles is not that simple – the initial capital outlay required can significantly drain a company’s cash flow and impact planned growth. Instead, firms are turning to leasing rather than purchasing because they can access brand new vans they would not have been able to previously afford outright. Through the buying power of leasing companies, businesses can pay manageable, monthly payments and a small upfront fee to provide the great first impression customers demand.
Not just for making an impression
Looking at the bigger picture, providing businesses with access to new vans is just one factor behind the growing number of firms leasing company vehicles. By leasing, firms can strip these depreciating assets off balance sheets while relieving the burden of unplanned maintenance and repair costs, freeing up cash for expansion.
Access to new, premium vehicles can enable firms to provide improved remuneration packages to reward staff and pull significant weight in the job market. Forming an attractive employee benefits proposition is often key to bringing in the top talent, and having a choice of company car or van is perhaps more important than many may believe – the 2014 Report on Motoring found that the degree of choice available is key for six out of ten current company vehicle drivers when it comes to considering a new role.
In addition, companies can also lower their tax bills. By accessing cleaner, up-to-date models with new engine technology every couple of years – depending on contract lengths – firms can reduce their vehicles’ carbon emissions significantly while moderating fuel consumption. Interestingly, 50 per cent of company car and van drivers are not aware that carbon emissions contribute towards vehicle tax, according to the report.
Whether firms are looking to earn better first impressions from customers or eradicate the costs that come with vehicle ownership, leasing provides companies with a simple choice that can help them retain business and streamline as they prepare for growth.