Following the economic downturn in 2008, a number of van fleets looked for more flexibility in their operations than that provided by the contractual obligations of contract hire. That in turn may have encouraged some vehicle hire companies to focus more on vehicle rental business than contract hire, especially with flexible rental agreements. The cost to the customer may have been higher, but the ability to return vehicles when no longer needed at short notice and without penalties meant that they could still yield a cost saving, compared with contract hire.
Shrewsbury-based Burnt Tree may be better known for its van rental business today, but the company has also offered contract hire in parallel for as long as it has been involved in rental business. Around five years ago, the company shifted its focus to flexible rental and light CV rental business. ‘About 80% of our fleet, if not higher, is vans and the majority of that is rental,’ explains marketing manager, Andrew Hill.
The company is shifting gear again, having recruited Mark Howell from Ryder as director of contract hire in March. Mr Howell was sales and marketing director at CV contract hire and fleet management specialist, Euroway, when it was absorbed by Ryder in August 2012. He is tasked with establishing a dedicated contract hire division at Burnt Tree.
‘What we’re doing now with Mark Howell is bringing in someone who has a dedicated contract hire background, but also someone who comes with refrigerated and controlled temperature experience and that’s going to be a very big push for us,’ says Andrew Hill.
Mark Howell’s arrival also signals growing interest in the heavy vehicle sector for Burnt Tree, but this does not mean that van customers will be neglected, ‘Contract hire on our vans probably won’t change in terms of the customer’s perception or experience. They will still be dealing with their rental sales contacts,’ explains Andrew. ‘We do have around 2,000 heavies on our fleet, so it’s not that we haven’t been offering it, it’s just that we have not had a dedicated contract hire focus on it.’
Burnt Tree expects to be looking at customers in the food distribution and pharmaceutical sectors. Business could also include supermarket home delivery fleets, building up Burnt Tree’s light CV contract hire business as well.
‘People have had to look very closely at balance sheets and I think they recognise that owning your own vehicles is probably quite an old-fashioned way of thinking about it,’ continues Andrew Hill. ‘It’s an asset than unless you are buying in a very sophisticated way is only going to depreciate in value. We manage our fleet share very closely and part of our business model is being able to take advantage of residual values and being able to manage the way we buy and sell our fleet. For most companies it’s not their core business, so they don’t have that dedicated focus. So actually, they stand to lose quite significantly if they buy and sell at the wrong times.’
In the coming year, operators of both light and heavy commercial vehicles are going to be affected by Euro 6 emissions legislation. This will add to the cost of vehicles because manufacturers will need to recover the additional costs of adding more sophisticated emissions control equipment. The costs will be higher for vehicles over 3.5-tonnes gross weight than for vans. Whole Vehicle Type Approval will also add to the cost of vehicle bodywork, particularly for vehicles over 3.5-tonnes GVW. Contract hire could help to reduce the impact of these costs for fleets. ‘Certainly with heavies, most people are trying to put off Euro 6 for as long as possible,’ says Andrew.
But with longer lead times for heavier vehicles, it won’t be possible to avoid the cost of Euro 6 for much longer.