TAKING OUT A CONTRACT
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The British Vehicle Rental and Leasing Association held its first commercial vehicle seminar last week. About 100 of the country's top contract hire and truck leasing firms turned up to hear about the industry's latest trends. Geoff Hadwick reports.
THE FUTURE
• In the past three years, 1984 to 1986, the number of light vans and conversion vehicles being rented has declined by 21%, while the number of heavy commercials and tractor units going out on rent has leaped ahead by 90%, the seminar was told by former BVI.RA secretary Oliver Dawson.
These trends are particularly marked in the contract hire and leasing market where the light van market has dropped by 25% over the same period and the heavy truck market has grown by no less than 151%. Although Dawson got his figures from a sample survey of 25 major truck companies with only marginal interest in light vehicles, the overall picture could not be clearer. Truck leasing figures will probably increase by about 15% in the coming year, said Dawson, "with the emphasis on contract hire."
Too many cut-price cowboys have jumped on the contract hire bandwagon now, thinks the BVLRA, and the less professional, Johnny-come-latelys could suffer frome a fall in business.
According to Dawson: "To achieve these increases there should be no need at all to think of buying business by cutting rates — this is self-defeating. 'The professional calculates his rate to give a fair deal to the lessee and a reasonable rate of return to himself. Further reductions restrict services, create inefficiencies and are totally counter-productive."
Dawson predicted that the Iveco Ford and Leyland Daf mergers will throw up problems for the two groups over the next few years as the manufacturers knit their new ranges together. Also, by the 1990s the Japanese will take 40% of the medium van business — "the fastest growing CV market in Europe."
SPECIALIST TIPS
• A panel of specialists considered a range of topics in the afternoon, from residual values to hire rate differentials.
British Car Auctions managing director Tom Gibson gave some average residual values, from his experience at BCA. Gibson told the audience that a 1984 Toyota Hi-Ace or a similarly-aged Renault Traffic T1000 should fetch 51% of its new list price when sold. A 1984 Ford Transit 190 Luton or a Volkswagen LT38 Luton should get about 39% of list price, and a 7.5 tonne Ford Cargo or an MAN MT should get about 35%. A three-year-old Mercedes 1617 or a Scania P82m would fetch about 37% of list at auction, in his experience, and a tractor unit like a Leyland 1'45 would fetch about 31% of its price when new in 1984. Cummins and Rolls engines remain good selling points, he says.
Eurohire boss Simon Kerr gave a thought-proking talk on hire rates. The cheap contract hire company is selling itself short he said, and even the most efficient company, with its trucks out of the yard from Monday to Friday every week, is still 28% inefficient. You're only efficient if your vehicles are out on hire seven-days-a-week, said Kerr. Maintain a margin (minimum) of 20% — and pay your staff more so they sell more and create a sense of pride in the operation.
A number of contract hirers at the seminar criticised the increasing number of truck manufacturers moving into the contract hire and leasing market. "If manufacturers go into contract hire, it is to protect the rubbish they build and their vehicles' residual values," says AU Turner's Anthony Darbyshire.
Leyland's Robin Woo!cock says that if the contract hire firms dislike manufacturers competing in their market, the answer is simple — don't buy their trucks.
SELLING YOURSELF
• What does a contract hire customer look for in a transport company trying to sell its services? Ray Bayfield, the group transport director of the giant George Wimpey construction company, gave some answers.
His firm is so big that it does its own form of internal contract hire and leasing in-house, and would not normally require an outside contract hire service, but he gave some pointers from a position of power and experience.
Firstly he would want to know how the rental and contract hire company sells itself, and how easy it made itself to find. As part of this inquiry he would check out whether the firm had been in the trade press recently or had any "favourable media exposure".
The next thing would be to assess the rental company's rep: "The man who comes to see me must be professional, and act it and look it," said Hayfield. Vehicle back-up and support comes next — it's far more important than the bottom line that the vehicle keeps running," he advised.
Make sure the vehicles are clean with a good, striking livery — preferably the customer's own livery; "Valuable mobile advertising space is let go to waste because not enough thought goes into vehicle livery and presentation," said Bayfield. "A client with a vehicle in his own livery is far more likely to take pride in its appearance than any he hired in a plain and nondescript finish."
Your financial credibility and commit
ment are also important, said Hayfield. Aggressive rates are only one part of the overall equation.
Finally, he would prefer it if you are a member of the BVRLA says.
ACCURATE PRICING
• Write down two numbers, Leyland Trucks' UK operations director Robin Woolcock told the seminar audience. First, work out a reasonable price for a new 7.5 tonne Leyland Roadrunner fitted with a standard box body and taxed ready for the road. Second, work out the cost of repairing and servicing the same vehicle for the next five years, assuming that it will cover 50,000km per annum.
He is willing to bet you are close to the truth with the first answer and way out on the second — provided you do it in your head, of course.
Woolcock reckons that you should shell out around £14,000 for a new Roadrunner — and about £8,400 for the cost of its upkeep over the next five years.
It is relatively easy to understand initial price but not easy at all to understand the other elements which make up the whole life cost of operating vehicles," W000lcock told the Seminar.
His version of events runs like this: the cost of buying the truck is 15% of the whole life cost; fuel and driver bills will take a whopping 45% as the years go by, and the remaining 40% can be attributed to a whole bundle of variable costs such as depreciation, repairs, licences, interest charges, overheads, tyres, insurance and servicing.
Warranties and extended warranties offered by the truck manufacturers are one way of keeping the variables under close control, said Woolcock, and to help operators maintain better cost records he suggested setting up a five-year table of costs for every vehicle you run. At the end of every year the truck is in service write down the annual total for the following: maintenance; repairs; recovery; pt-o useage; out-of-hours servicing; foreign travel costs; onand off-road use; and finally the annual inflation rate.
Work out your costs, and if you are cheaper than a Leyland warranty and/or repair and maintenance contract they you are doing well, he suggested. Woolcock is happy to provide the support if you don't make the grade, and he said: "There is no profit, or loss, in repair and maintenance for me. The profit I wish to make is in the sale of our product, which is a truck.
"Fill in the blanks in the suggested table of costs and reach your own conclusions," he suggested.