EXECUTIVE DRIVER : Lease Business Booming; as Trading Conditions Remain Unstable, More Companies Are Turning to Car Leases -- and They're Buying Smaller Cars

New Zealand Management, November 2010 | Go to article overview
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EXECUTIVE DRIVER : Lease Business Booming; as Trading Conditions Remain Unstable, More Companies Are Turning to Car Leases -- and They're Buying Smaller Cars


Of all the vehicles purchased by New Zealand companies, around 40 percent are leased, but those involved in the industry are expecting business to boom as companies place more emphasis on effective use of capital.

In the US, more than 70 percent of business vehicles are leased, says Mitchel Booth, general manager for New Zealand of GE Capital's fleet and equipment finance wing, so he believes there's room to grow.

"Capital is precious, so businesses are looking for fleet efficiencies, in an attempt to drive down costs and focus on life-cycle management."

Since the worst of the recession, the car industry has experienced a noticeable upswing, with Land Transport New Zealand figures showing new car registrations in the year to August 2010 up 13.8 percent on the same period in 2009. While still behind new car registrations for 2007 and 2008, this shows a positive movement over last year.

Booth says since economic conditions have tightened, there has been a significant upturn in leasing activity as businesses gained more confidence.

"However we believe there may still be companies suffering from the recent economic conditions, especially in light of the continuing issues in Europe.

"Throughout the recent economic downturn, many companies were more interested in having the flexibility of extending terms on their leases and reducing rentals than going to market. However 2010 has seen a shift in this stance with Custom Fleet participating in a number of new tender opportunities."

He says the benefits of leasing over buying include that there is no capital outlay, just a monthly lease rate at a fixed rate that's easy to budget for, no ownership risks, one monthly tax invoice for all vehicle-related costs, and often tax-deductible payments.

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