I had the pleasure of joining the recent BVRLA Inside Track podcast, where we spotlighted the leasing broker industry.
It gave me an excellent opportunity to build on my industry outlook article from earlier this year, reflect on the year so far and to consider, with some optimism, the year ahead.
In this article, I'll share some valuable takeaways from the two big podcast themes: the state of the sector and product trends.
The state of the sector
The management of supply in the market continues to be a significant challenge, but it's an evolving challenge. This is best represented by vehicle order lead times, where we've come from a position of long lead times in the pandemic and initial post-pandemic period to a situation now where lead times are reducing. This is positive; however, new challenges, such as vehicles becoming available at short notice, have arisen – staying close to the customer to manage their expectations here is difficult but essential and something we are working hard to operate effectively.
Cost of living continues to bite
The sector doesn't live in a bubble, and our customers, overwhelmingly from the SME space, continue to be impacted; how we support them as their broker is crucial. We're continually flexing to meet their needs, and this is where the proactive nature of our business comes to the fore – initiatives such as regular contract reviews, encouraging the use of our driver tech to manage mileage, comprehensive end-of-contract wear and tear support, and more generally engaging a wide range of funders to ensure we're providing the most competitive rates, are all ways in which we support our customers in this challenging time.
Reacting to changes in customer motivations
We're finding customer motivations are changing, often driven by cost of living and environmental considerations. Here are three quick examples:
- We're seeing a focus on value. Price is important, but in our conversations, we're finding customers are starting to place more importance on how they can be more efficient when it comes to their fleet
- Driver and fleet tech matters. Encouraging our clients to adopt and engage with the range of driver and fleet technology available to them is crucial in both or on-boarding and general; account management processes.
As I stated earlier, from mileage management to help better manage and predict fleet costs, to the time saving, to the peace of mind that comes from having the touch of a button support to keep your fleet on the road, fleets who use technology will seriously benefit
- Electric vehicles are never far away in our customer discussions and motivations. There's some real progress in terms of available stock and selection of vehicles; the challenge remains, especially for our commercial vehicle customers, around charging infrastructure
Getting ready for Consumer Duty
The sector, boosted through the leadership of bodies such as the BVRLA, is serious about Consumer Duty. We operate in the business contract hire space; however, the principles of delivering good outcomes for customers, competing 'vigorously in the interests of customers' and better protecting customers, don't stop at the retail customer – in our view, these principles will transfer across 'unofficially' to the BCH world in respect of customer expectations, so it would be negligible for us not to be mindful of them.
The growing popularity of Business Contract Hire (BCH)
Regarding the sector generally and BCH specifically, we see 'green shoots' and, though not without challenges, we are more confident in 2023 and beyond versus the initial post-pandemic period. The BVRLA's Leasing Outlook Survey, published in April 2023, reflects this BCH growth, citing a BCH increase of 4% year-on-year, which we recognise within Gofor.
I mentioned lead times earlier in the article; they are reducing, giving our SME customers more confidence in BCH and strengthening our 'green shoots' view.
Electric Vehicles are a significant driver here too. Choice and availability are increasing, and the value from Benefit-In-Kind is firmly on our customer's radars. Indeed EVs have become the predominant vehicle fleet choice, with more than half (53%) of new business contract hire cars classed as battery electric vehicles (BEVs).
Significant challenges remain around infrastructure. However, steps such as the creation of ChargeUK as a new trade body for the EV charging industry can only be positive for the BCH sector and SME businesses.
Salary Sacrifice: a different but important proposition
Our salary sacrifice for electric vehicles product is gearing up for a busy year.
The market is clearly there, the BVRLA citing a 34% year-on-year, between Q4 2022 and Q4 2021, in the number of salary sacrifice cars on the road, but there are a lot of providers trying to take their share, so from a Gofor perspective, we'll continue to evolve our proposition from a product, go-to-market and digital perspective - we must make it as easy as possible for the customer to implement our salary sacrifice scheme.
Part of our focus in the short term is to share the employee and employer benefits of the product with our existing customer base; the interest here is significant. It's a product that ticks many boxes, from Environmental, Social and Governance policy, to Employee Value Proposition, and we expect to continue to grow sector-wide for the rest of the year.
Overall, I'm optimistic for the remainder of 2023 and beyond. Supply is improving, electric vehicle and driver technology adoption are increasing, and business contract hire is growing, underpinned by some fantastic products in the market. This is providing our customers with choice, value and the capability to tackle some of the big challenges they face around fleet electrification and value for money - as their broker, we must ensure they can take advantage of these developments.
Interested in listening to Paul’s BVRLA Inside Track podcast? You’ll find it at:
🎙 Spotify: https://lnkd.in/ejfFRsmw
🍏 Apple: https://lnkd.in/eJ4ujtyT
🔎 Google: https://lnkd.in/e8TiMkXk
📦 Amazon: https://lnkd.in/eebMg_SK