Why has Auto Trader bought Vanarama?

THE acquisition of Autorama’s Vanarama brand by Auto Trader for £200m is firstly, a huge amount of money seen for a leasing broker, and secondly a terrific fillip for the sector.

It shows – among the recent investments in leasing broker firms (think Global Vans and H2; DriveElectric and Sumitomo; MAF Leasing and Begbies Traynor Group; Synergy Car Leasing and Newable) – that there is increasing value seen in the broker sector.

Something noted by Martin Brown, chair of Fleet Alliance, on LinkedIn who called it a “great message for the leasing broker sector”.

And I think Martin is absolutely right.

Leasing brokers are expanding their proposition to be even better in their digitisation – offering an increasingly seamless customer journey – or creating relationships with businesses by investing in fleet management.

The move into electrification by both business and consumers is providing brokers with another opportunity to reach more customers, reflected in bulging order banks. 

Select Car Leasing sold 30,000 units in 2021 and believes it will do more in 2022. Why not? It has brilliant reach, fantastic marketing capabilities and a wider range of products to offer customers, from corporate fleet management to high end vehicles.

The BVRLA’s latest fleet is forecast for the leasing sector to grow 3% by Q2 2022. 

PCH – the driver of growth

Much of this is the personal leasing market – the BVRLA’s report noted the “accelerating growth in PCH, with a fleet increase of just over 17% adding more than 47,000 cars; the growth rate quadrupled compared to the same period last year (3.9%).”

It’s certainly this area that has attracted Auto Trader, the UK’s largest automotive market place. However, 95% of its revenue comes from used vehicles. 

But it notes that the pace of change in the sector – and what consumers expect – is changing rapidly, accelerated by market disruptors such as Cazoo and Cinch, not to mention leasing brokers and the effects of the COVID pandemic. And the level of investment in digitisation is at unprecedented levels.

Electric vehicles are encouraging new entrants while personal leasing is growing at pace.

In a statement Auto Trader prepared for analysts, it said of personal leasing:

“It’s a compelling choice for buyers considering electric vehicles, but has also benefited from the reduction in company cars and is well positioned for a potential move towards usership.”

It also notes the effects of the move to agency models which are “shifting sales and customer acquisition to OEMs and digital channels”.

The opportunity to offer consumers new vehicles

So, by acquiring Vanarama, it enables Auto Trader the opportunity to offer consumers new vehicles online, provide OEMs and leasing companies the ability to sell direct to consumers and to transform Auto Trader’s leasing market place.

Ian Richardson, managing director of 360 Media Group, a market research and data company in the fleet, dealer and leasing sectors, commented:

“While observing the investment into Cazoo I have been thinking that Auto Trader is much better positioned to disrupt given their reach and brand. 

“It’s interesting as we have clearly seen a significant shift towards EVs in cars and with vans due to come on strongly in the next two years.

“Auto Trader provides some excellent insights that plot market trends and identifies what will sell in the future. Vanarama has an extensive customer baseand has a team of experienced sales experts behind them. 

“Both brands are household names with a track record of delivery on their promise. 

“Looking at Cazoo it clearly has limitations with its stock volumes and choice. As of today it has 6439 cars for sale, with just 196 EVs available, with not all brands represented.

“This is clearly not enough choice to generate sustained interest or revenue on the new or used EV opportunity and with interest in electric cars at an all time high and diesel prices rocketing, this is a lost opportunity. 

“I get that there is a much bigger play with refurbished stock, car subscriptions and pricing, however, most EVs currently being sold are leased and that is an issue for Cazoo.”

What we don’t know yet is the reaction of the funders to this acquisition. Will they embrace the opportunity to access greater numbers? Or will they bridle at the potential lack of control that this might entail?

That’s still an issue to play out. 

But overall this has to be a brilliant boost for the leasing broker sector – and a sign that we’ll see more mergers and acquisitions in the future.