Customers want to feel safe about where funding is
coming from in the post-crisis world, reports Antonio
Fabrizio
Partnerships between banks and fleet management companies are to
become more open as customers begin to demand greater
transparency.
Go deeper with GlobalData
The tie-up between Santander and
Zenith Provecta, reported in Motor
Finance last month, is an example of how public such
arrangements are likely to be in the future.
The dual-branded fleet proposition
will see the Spanish lender provide funding, while the fleet
management company looks after services from maintenance to daily
rental and grey fleet management solutions.
Speculation within the sector that
some banks which own motor finance operations might attempt to sell
appears to be undermined by Santander’s move. Rather, the tie-up
suggests the underlying principle of fleet management companies
providing a one-stop shop for customers remains unchanged, despite
rumours that banks might look to divest or shut non-core
business.
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By GlobalData‘Mover and
shaker’
Roddy Graham, commercial director of Leasedrive Velo and
chairman of the Institute of Car Fleet Management, said: “Santander
is a mover and shaker in the corporate banking market, and with
this strategic alliance each partner is providing what they are
good at.
“Lots of banks, for good reasons,
decided in the past that they wanted to have their own contract
hire offering. Many banks are now looking at what their core
business activities are and, even when they find that this is not
core, they might still like the idea of having a service offering,”
Graham added.
Julie Jenner, key solutions manager
at GE Capital Fleet Services said such public alliances are likely
to increase as customers want more information and reassurance on
how their fleet management provider is funded.
In the case of GE Capital, the
lessor’s funds are made available through GE Money, so it does not
rely on a bank for funding.
“We will see more of these open
relationships as contract hire companies seek to give assurance to
their customers that they have links with strong banks and that
capital and finance is not a problem,” Jenner said.
“Leasing companies will have to be
prepared to give comfort to each customer that they have the
funding.”
And the financial crisis has
encouraged the fashion for greater disclosure.
Jenner said: “In the past, fleet
managers didn’t really care where their leasing company got their
money from, because they hadn’t experienced any problems.
“But I guess now people are a
little more wary about it because of the banking crisis.”
The desire for greater transparency
comes as fleet management continues to evolve into a sector
radically different today to what it was 20 years ago.
The major change has been that
fleet management companies are now seen by customers as providing a
full suite of ancillary products alongside contract hire.
Graham confirmed the one-stop shop
is now the sector’s dominant business model.
He said: “If you look at the range
of activities in fleet management today, you have not just a
product that helps you buy the car, maintain it and sell it.
“You have an array of ancillary
activities that customers expect us to
provide.”
These activities could include –
but are not limited to – MOT management, licence checks, driver
profile maintenance, order reminders, tax and CO2
management, mileage capture, grey fleet, test drive, technical
support, sale and disposal of vehicles.
Graham said: “A lot of the major
leasing and fleet management companies are able to provide most of
these activities, but some of the smaller ones provide a very
limited level of services and products.
“This is why we are seeing a
significant change in the industry, because you really need to
provide this wide range of products and services to ensure that
your customer is getting good value.”
Complicated and
expensive
The alternative for customers is to
engage with numerous third-party external suppliers, which can make
things complicated and expensive.
The majority of Leasedrive Velo’s
customers take advantage of the lessor’s full contract hire
proposition, although some need “pure management services on a fee
basis”, Graham said.
“If we have a customer with access
to very low funds and because of their financial structure, owning
the vehicle outright is still their preferred option, then we are
fine with that,” he added.
“We can provide all of the
ancillary services on a fleet management basis, without us owning
or taking risk on any aspect of that asset.”
In this market, the customer is king.
