EXECUTIVE DRIVER : Lease business booming

Of all the vehicles purchased by New Zealand companies, around 40 percent are leased, but those involved in the industry are expecting business to boom as companies place more emphasis on effective use of capital.
In the US, more than 70 percent of business vehicles are leased, says Mitchel Booth, general manager for New Zealand of GE Capital’s fleet and equipment finance wing, so he believes there’s room to grow.
“Capital is precious, so businesses are looking for fleet efficiencies, in an attempt to drive down costs and focus on life-cycle management.”
Since the worst of the recession, the car industry has experienced noticeable upswing, with Land Transport New Zealand figures showing new car registrations in the year to August 2010 up 13.8 percent on the same period in 2009. While still behind new car registrations for 2007 and 2008, this shows positive movement over last year.
Booth says since economic conditions have tightened, there has been significant upturn in leasing activity as businesses gained more confidence.
“However we believe there may still be companies suffering from the recent economic conditions, especially in light of the continuing issues in Europe.
“Throughout the recent economic downturn, many companies were more interested in having the flexibility of extending terms on their leases and reducing rentals than going to market. However 2010 has seen shift in this stance with Custom Fleet participating in number of new tender opportunities.”
He says the benefits of leasing over buying include that there is no capital outlay, just monthly lease rate at fixed rate that’s easy to budget for, no ownership risks, one monthly tax invoice for all vehicle-related costs, and often tax-deductible payments.
One side effect of the falling fortunes of many movers and shakers has been an increase in smart European cars ending up at auctions for fraction of their usual cost.
At recent Turners prestige car auction, the list read like the ‘who’s who’ of luxury motoring, says Graham Roberts of Turners.
While company owners may be tightening their belts and divesting themselves of high-value vehicles, in the fleet market there is also continuing trend toward smaller vehicles, says Booth.
“This started when fuel prices increased and the urgency grew for businesses to become more sustainable, though this was placed on hold at the onset of the global financial crisis in favour of reducing costs.
“While there is strong shift away from large cars to medium and small, new engine technologies and pricing mean that the Commodore and Falcon still have place in the New Zealand fleet,” says Booth.
Whilst Toyota Corolla still holds the top spot, closely followed by the Mazda 3, he says the company has noticed an increased interest in the Suzuki Swift in the small car space.
While the Government continues to deliberate on its strategy, the industry is not currently seeing huge resurgence in the ‘green’ theme, he says.
“Should legislation be introduced to require offsetting for emissions, we believe this interest will again increase.”
And the CEOs favourite car? “European models are definitely in this group, along with the higher-spec SUV models.”