Research shows that business is turning to contract hire for stability during tough times

New research suggests that during the economic downturn, businesses are turning to contract hire for the stability that it provides. The findings from the Arval backed Corporate Vehicle Observatory (CVO), show that over the next few years contract hire will be the vehicle funding method of choice, especially for larger companies.

The CVO research was carried out this year across 12 different countries, including the UK. The results project that contract hire will be the most popular funding method amongst larger companies over the next three years with 63% of contract hire customers having 1,000 or more employees.

There are also signs of a shift to contract hire in the next three years across all sizes of business. 63% of large companies (1,000+ employees) plan to increase their use of contract hire, 44% of whom already use it and 20% plan to switch funding method. 28% of companies with 100-999 employees plan to develop the use of contract hire and 24% of companies with 10-99 employees have the same view as do 10% of companies with less than 10 employees.

While other methods of financing remain prominent the research also demonstrates that amongst companies already using contract hire, over the next three years there is no intention for users to move to another method. The story is not the same for companies purchasing their own vehicles (6% show intention to reduce), car credit (8% show intention to reduce) and financial leasing (5% show intention to reduce).

With companies looking to transfer risk contract hire provides a means of not only mitigating this risk but also sidestepping the unpredictable used car market. According to the CVO the most popular reason that fleets are choosing contract hire is fixed monthly vehicle costs at 38%, interestingly this scores higher than the opportunity to save on costs. It also came ahead of flexibility of contract, and integrating all services into 1 contract.

Among those companies using contract hire there is a definite willingness to outsource. 48% of large companies (1,000+ employees) who take out contract hire outsource fleet management, with 37% of mid sized (100-999) doing the same, and 22% of smaller businesses (10-99) outsourcing. What’s more, as a result of the credit crunch, 13% of respondents are outsourcing more fleet services.

Mike Waters, Director – Market Insight at Arval comments:
“Contract hire provides a range of benefits including stability, guaranteed driver mobility, the opportunity to cut costs and reduced administration. With this in mind it is no surprise that contract hire is proving a popular option during the downturn when businesses are craving stability as well as managing costs more tightly than ever”

He adds, “With the clear appeal of contract hire, the important consideration during this economic downturn is not just the stability that it provides but making sure to choose the most stable supplier to provide it.”

Some of the results:

  • - 63% of companies using contract hire are large companies (1,000+ employees). 
  • - In the UK no users of contract hire plan to move to an alternative method of finance in the next 3 years.
  • - In the next 3 years 63% of large companies (1,000+ employees), plan to develop their use of contract hire as a vehicle funding method.
  • - This can be broken down between 44% who already use contract hire and plan to expand this and 20% who currently use an alternative funding method.
  • - Amongst companies with a workforce of between 100-1,000+ employees the most popular reason for selecting contract hire is fixed monthly costs of a vehicle at 38%.
  • - This is followed by flexibility of the contract (26%) and integration of all services into 1 contract (25%).
  • - Among businesses with 1,000+ employees who use operating leasing, 48% outsource fleet management.
  • - Among businesses with 100-999 employees who use operating leasing, 37% outsource fleet management.
  • - Among businesses with 10-99 employees who use operating leasing, 22% outsource fleet management.
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For further information please call Graham Nichols, PR Manager, on 01793 884453 or E-mail graham.nichols@arval.co.uk

Editor’s Notes

Arval Contract Hire Fleet & Fuel Management Specialists 

Arval is the leading fleet and fuel management company in Europe, owned by BNP Paribas, one of the largest European banking groups, with substantial buying power and a commitment to quality through over 30 years fleet management experience. Arval is a people lead company, with specialist teams dedicated to businesses from start-ups to FTSE 100