Is leasing the car finance option that consumers really want?
It’s no secret that the Personal Contract Hire (PCH) sector continues to grow at an exceptional rate, and leading lights in the rental and leasing industry are debating whether the growth indicates that it’s becoming the finance type that new car customers really crave.
Although Personal Contract Purchase (PCP) is still the most popular form of car finance, during a panel session on personal leasing at the British Vehicle Rental and Leasing Association’s Annual Industry Conference, renowned Frost & Sullivan consulting director Graeme Banister said the UK is “rather unique” in its appetite for PCP.
He also posed the following simple, probing question of PCP: “Is it what consumers really want?”
In many of the world’s largest economies, consumers prefer to lease instead, and you don’t need a degree in microeconomics to know the importance of consumer preference.
Mercedes-Benz C Class
C220d Sport 4dr Auto
- 10k Miles p/a
Per Month, EXC VAT
Business Users Only
In the US, 34% of people now lease their vehicles. In states such as New York and Michigan, Frost & Sullivan have found this figure is above 50%.
PCH is gaining market share across Europe too and in some countries it is already more popular than the PCP equivalent. In Germany, private leasing accounts for 20% of the market, while the figure is even higher in France (21.7%).
PCH market share increasing
In the UK, PCH accounted for 7% of the new car retail market in 2015, according to data from the Finance and Leasing Association (FLA).
This market share is forecast to increase in 2016 and 2017 and expected to hit 10% of all car retail sales in the UK by 2020, but Banister speculated that this figure could be reached even sooner. He might be right. He often is.
Personal leasing is no flash in the pan. David Blackmore, Fleet Alliance
Also speaking at the session, David Blackmore, commercial director at Fleet Alliance, said: “Personal leasing is no flash in the pan.
“The demand for leasing is being driven by the consumer and their desire to use a car, rather than own it.”
Growing consumer demand for car leasing
Whether manufacturers, funders, dealerships and others in the automotive industry like it or not, they need to accept that PCH is growing as a result of consumer demand. And one thing 2016 has shown us is that the general public are in the mood to disrupt the established order of things (Brexit, Trump etc).
Gone are the days when Margaret Thatcher drummed into everyone that home ownership was the be-all and end-all. For Millennials and other generations who’ve embraced the Spotify and Netflix way of life, access and usership is the new ownership – and all for a fixed monthly cost.
40% more leasing brokers
The continued growth of personal leasing was also underlined at the conference by BVRLA chief executive Gerry Keaney, who said that the association has seen a 16% increase in membership since the end of 2015.
It’s no surprise the majority of companies that have joined the association in 2016 are leasing brokers. This sector now consists of 308 of the BVRLA’s 908 members, which represents a 40% year-on-year rise.
Keaney said the rental and leasing industry is entering unchartered territory when it comes to success: “We are fast approaching a combined fleet size of five million vehicles, which has never happened before.”
According to the results of the BVRLA’s latest quarterly leasing survey, the number of cars and vans within the business leasing sector (contract hire and finance lease) has grown by 5.2% year-on-year, with the car fleet increasing by 2.2% and the corresponding van figure up 13%.
The overall size of the BVRLA car leasing fleet has increased by 10% year-on-year, with PCH accounting for nearly 60% of this growth. That’s right, 60%.
The ascent of personal leasing is the elephant in the room that can no longer be ignored.