Flexibilty is the order of post-Brexit day
General unwillingness to commit to long-term contracts should be mirrored in fleet decisions so it's time to consider flexible rentals
There’s still not much clarity on what Brexit will mean for the UK, even so close to the activation of Article 50. We’re still seeing many businesses putting long term decision-making on hold. They’re unsure of demand and keeping plans short-term.
Many are worried that the commercial impact of Brexit will be like the crash of 2008-09. But financially and economically, the two are significantly different. There’s no credit crunch here.
In fact, funding is still widely available and actually seems cheaper than ever. Is this one of the greatest risks: that cash is temptingly affordable?
Some sectors like construction are seeing transport SMEs and owner operators prosper as bigger companies outsource the surplus to them, rather than expanding their own fleets through long term contracts at a time when customers may be unwilling to commit.
At the same time, vehicle providers are enticing sales by promoting low-cost deals. It can all make purchasing vehicles look attractive.
However, indications that US interest rates may be rising, and that the economy may turn at any point, means that even companies with rising revenues need to be careful about what may lie around the corner. Being tied in to loans for fixed assets can hurt: flexibility to change your van and truck fleet when circumstances alter has never been more important.
Because many end customers are unwilling to commit to long-term distribution contracts due to their concerns over Brexit, operators could benefit from being wary of large capital commitments. Thinking flexibly works.
It’s vital to maintain a fleet that supports customer demand – and, in this case, that tends to be for short-term contracts at best. That could mean taking vehicles on shorter-term deals – perhaps for one or two years (or even less) instead of the five or seven-year contract hire arrangements that operators previously adopted.
That presents challenges: how many commercial vehicle providers are willing to take the risk on shorter agreements? Many don’t want to offer flexibility because they may end up lumbered with a fleet they can’t shift in a year’s time. This may lead to either paying a premium or compromising on vehicle specifications.
So it’s more important than ever to deal with providers that can withstand uncertainty and offer flexibility without limitations. Their financial solidity should be among the first considerations, so that fleet operators know their partner can hold up under the strain and always have the right vehicles to hand.
We may not yet know all the longer-term implications of Brexit, but the immediate impact is more about what’s not happening than what is: many organisations are simply unwilling to commit to long-term contracts, whether as vendor or buyer.
So, although it may still be easy to acquire new vehicles outright or take on long-term funding deals, what’s clear is that businesses should look at being more open in their approach. If they haven’t seriously looked at flexible rental before, now is the time.