Executive Summary
The vehicle rental and leasing market in the UK was estimated to be worth around £13bn in 1997. It has experienced several years of growth on the back of a strengthening domestic economy and the increasing popularity of outsourcing. The overwhelming majority of the market — 87% — consists of long-term rental, predominantly leasing. Cars account for 86.2% of the long-term rental fleet and 77.2% of the short-term fleet in 1998. In total, there were 2.2 million vehicles in the UK’s leasing and rental fleet in 1998, an increase of 10.3% on 1997.
The long-term vehicle rental market is much more complex than the short-term market. Long-term vehicle hire can involve one, or a combination, of several different types of financing arrangements (possibly involving the transfer of legal ownership), whereas short-term rental is generally a standard day-by-day type agreement.
A defining characteristic of the vehicle leasing and rental industry is that it is highly fragmented. The majority of firms represented by the industry’s main trade body, the British Vehicle Rental & Leasing Association (BVRLA), are small — in 1997, 82.6% of the association’s members had fleets of less than 100 vehicles. This plethora of small, local businesses has made the industry extremely price competitive and tended to depress margins, especially in the short-term market.
Another significant weakness for the industry is that it remains heavily exposed to possible changes in the structure of both personal and corporate taxation. In this regard, the industry remains extremely concerned about the future direction of transport strategy under the Labour Government.
The outlook for the sector is uncertain. With evidence of economic recession gathering strength, falling industrial confidence and profitability will undoubtedly reduce spending on cars by the corporate sector. In the short-term rental market, activity has been hit by the strength of sterling, which has depressed visitor numbers to the UK. More positively, the exit of vehicle manufacturers from the leasing and hire market should reduce competition in the industry. Moreover, the long-term vehicle leasing sector should benefit from the continued trend towards outsourcing.
Indeed, this trend may itself accelerate during a period of economic downturn as companies are forced to focus on cost-cutting. The number of vehicles in the UK rental fleet is forecast to increase to 2.9 million by the year 2002.
Sixteenth Edition 1998
Edited by Phillippa Smith
ISBN 1-85765-880-9
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