HYBRID working is beginning to impact the length of business contract hire leases.
According to Arval UK’s latest research, nearly a quarter of fleets (23%) will lengthen their company car lease contracts because of the growth in home working.
The results are from businesses surveyed that have introduced or extended working-from-home since the start of the pandemic.
It found that the move towards contract extensions is more pronounced among larger companies with more than 1,000 employees (38%) compared with the smallest with fewer than 10 (24%).
The results have been reported in the 2023 Arval Mobility Observatory Barometer.
What we are seeing here is a number of trends converging following the pandemic. The most important is that some fleets are now covering markedly fewer miles, allowing them to operate vehicles for longer without higher mileage becoming an issue.
Home working is one of the main reasons for this trend. If people aren’t driving to work at least some of the time, their cars are simply not accumulating the same kind of mileage as when they commuted more often, and those vehicles can be operated for potentially quite a lot longer.
Shaun added that there was also a financial upside in lower monthly rental costs, although fleets needed to consider the impact of maintenance costs over a longer lease period.
According to the Arval research, some businesses (14%) believed that homeworking would lead to a reduction in contract lengths, with activity this time concentrated towards smaller fleets (22%) compared with the largest (4%).
This is an interesting response. Presumably, these businesses have run the figures and found that for the kinds of cars that they operate and the lower mileages they are covering, it makes financial sense to replace them more regularly. However, we have seen very few cases of this happening at Arval in the UK.
In a separate question, Arval Mobility Observatory Barometer also showed that the average length that UK companies operate cars is now 4.7 years, ranging from 5.1 from the smallest companies to 4.6 for the largest.
Shaun added: “This is the first year that we have asked this question, so we have no historical data against which to make a comparison, but certainly our best estimate is that this figure is perhaps a year longer than before the pandemic.
“Of course, this increase is not just about home working. A key development is simply that getting hold of replacement vehicles has been extremely difficult following the pandemic. The situation is now beginning to ease a little, but fleets have not been cycling through the buying and selling of cars in the normal fashion because it has been pretty much impossible.
“A further change that fleets have discovered from keeping modern cars for longer is that they are capable of higher mileages without reductions in reliability that would make them unsustainable.
“A car entering its fifth year with perhaps 80-100,000 miles on the clock is less reliable that one that is two years younger but probably not to a degree that is problematic.”
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Ralph Morton is the leading journalist in the leasing broker sector and editor of Broker News, the website which provides information and news for BVRLA-registered leasing brokers. He also writes extensively on the fleet and leasing market in both the UK and Europe.
