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FINANCE WALILCHARV
Page 127
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• Although accurate statistics are hard to find, it is clear that contract hire and leasing are becoming more important in the transport industry. One recent estimate puts contract hire vehicles at 36,800 and leased vehicles at 46,400 making 83,000 out of a total of 450,000. Significantly, while own-account operators use leasing and contract hire to a greater extent, there are still over 33,000 vehicles operated on this basis by hire and reward hauliers.
The consensus of opinion is that the growth of contract hire and leasing will continue, but it is to be hoped that contract hire will grow on the basis of true operational and profit benefit, rather than simply because it has, in some cases, the advantage of being "off-balance sheet".
Once the comparative costs have been established on an actual basis (substituting specific operating figures for the average shown in the chart), and have then been discounted as suggested, particular notice must be taken of the following factors: o Will the addition of vehicles under con
tract hire mean that an owned workshop can be closed? Is that workshop, if operated, required for any purposes other than the commercial fleet?
D What effect, if any, will having vehicles under contract hire have on the overheads of the business concerned? Would one result be that staff can be reduced?
0 What is the likely result in terms of vehicle availability? If the operation is very intensive and a vehicle off the road is a major problem, then the value of automatic replacement under contract must be carefully assessed against the alternative costs with an owned fleet.
It is therefore suggested that every operator contemplating vehicle purchase should look carefully at costs, on the basis of comparisons as suggested in the chart. They must also consider the other practical questions, including any upward trend in interest rates that would favour contract hire. Only by carefully weighing all these factors will the best answer be found. D Copy and tables by Brian Fish. DFF International.