With a booming van market in the UK, it comes as little surprise that manufacturer-backed finance has also been experiencing healthy demand. When the high-street banks and other lending institutions moved rapidly away from the LCV market a couple of years ago, manufacturer-led finance was, for many van operators, the only point of call. Now that financial support that manufacturers were able to put behind their products, is being paid back many times over.
‘It has been a record year in 2013 for Mercedes-Benz van sales in the UK, with more than 30,000 sold,’ says Steve Clement, general manager CV and direct sales at Mercedes-Benz Finance.
‘It’s been very buoyant for us too – we’ve just had a record year and have outgrown the market. For vans, we anticipate further growth in 2014 and on into the next year.’
Looking at the figures, Mercedes-Benz Finance funded one third of the company’s van sales in the UK last year – that’s around 10,000 LCVs. What’s more, 40% of those vans were sold under some form of finance agreement that incorporated a fixed residual value as part of the deal.
‘We do a lot of funding on Vito, but we also finance a lot of Sprinter and Citan vans as well,’ says Mr Clements.
As with all manufacturers, Mercedes doesn’t just offer a conventional contract hire product, though this remains a common choice with fleets. Finance and operating leases have become increasingly popular too and, for smaller companies in particular, the Agility contract purchase scheme has also been much in demand. This is no doubt thanks in part to its on-balance sheet accounting and guaranteed future value, providing customers with known costs throughout the term of the agreement.
Indeed having a fixed cost for the whole vehicle life has also become increasingly popular with fleet customers, as repair and maintenance contracts have also seen a growing uptake. Mr Clements admits that the next logical step for Mercedes would be actual fleet management, a move that he certainly doesn’t rule out in the medium term.
He also acknowledges that factors such as R&M are incorporated in stepped residual values. A Mercedes-funded van will be worth a little more than one financed outside the company, while one with an R&M contract will be worth a little bit more again. He comments that specification plays a strong part too, with add-ons such as air conditioning boosting used values further, an important consideration as Mercedes-Benz dealers are keen to build their used van sales position.
‘Residual value on Mercedes products is strong and that always has a benefit,’ says Mr Clement.
Indeed residuals play such a strong part in many deals that Mercedes-Benz can step in before the end of a finance term to swap vans over, if there is a benefit to the customer. Maintaining regular dialogue with the customer is an important factor in assessing van condition, mileage and value thoughout the finance term.
‘We look to do specific campaigns on returning vehicles,’ says Mr Clement.
‘We don’t wait for the contract to expire before having a conversation with the customer.’
For Mercedes-Benz Finance there is a secondary benefit to increased popularity of used vans, as it is prepared to offer similar contract funding on good quality pre-owned stock. It’s not hard to see why the company remains optimistic about further growth in the coming years.