Renegotiation Nation: Two Thirds of Car Leasing Firms Record an Increase in Customers Seeking to Revise Contract Terms
- 65% of car leasing specialists had customers attempt to renegotiate the terms of their rental agreements in the last 12 months
- Over three quarters (76%) of dedicated car leasing firms have witnessed an increase in late or defaulted payments
- 32% of companies have lost money in the last 12 months as a result of customers declaring insolvency or bankruptcy
New research from Creditsafe, the world’s leading provider of company credit reports, reveals that car leasing firms are under pressure from customers to renegotiate the terms of their rental agreements. Two-thirds of operators report customers attempting to amend the terms of their original contractual agreements in the last 12 months.
The main reasons for renegotiation were cited as a desire to amend the length of the lease agreement, or extend the contract mileage. Despite the price of petrol beginning to trend upwards2, the average price remains below £1.30 a litre and with the price of diesel continuing to fall, motorists are willing to travel further and are seeking to increase their mileage quotas.
Firms operating in this space have fallen victim to increasing incidences of late or defaulted payments in the last 12 months. Over three quarters (76%) of dedicated car leasing firms have witnessed an increase in payment issues with almost a third (32%) of companies losing money in this period as a result of clients entering insolvency or declaring bankruptcy.
While firms operating in this space are taking proactive steps to limit their exposure to client insolvencies, with all firms surveyed running credit checks on prospective and existing customers, Creditsafe advises they review the frequency of these checks. Increasing the stringency and frequency of customer credit checks and tracking their ongoing financial viability will help reduce losses incurred by customers becoming insolvent.
Chris Robertson, UK Managing Director Creditsafe said: “While the car leasing market remains buoyant, firms are still incurring avoidable losses. Customers’ financial circumstances can change very quickly and it is important leasing firms track the ongoing viability of customers to meet their financial obligations on a regular basis. Asset recovery can be a time consuming and expensive process, so it is often better to contact customers identified as ‘at risk’ proactively to address the situation.”
Robertson continued: “With many organisations struggling to justify the upfront capital outlay of vehicle fleet purchase and with access to financing still relatively tight, particularly in the small business sector, leasing offers an attractive alternative. As the economy picks up steam and demand rises further leasing operators will need to invest sufficient resource in credit risk management to try and drive down the unacceptably high levels of losses.”
Notes to Editor
1 Research conducted online by Creditsafe amongst 50 companies specialising in the leasing of commercial vehicles 8th-24th April 2014
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