Visitors to cities like London, Paris, Oslo and Beijing have grown accustomed to the ubiquity of charging points for electric vehicles or EVs.

The global market for EVs and related infrastructure has seen a major boost in the last 12 months. According to new research from EV Volumes, which monitors global sales, around 1.2 million EVs were registered worldwide in 2017, a 57 per cent increase on 2016. These figures include sales of battery electric vehicles (BEVs) and plug-in hybrid electric vehicles (PHEVs). China was the global leader with a 72 per cent year-on-year increase, representing nearly half of all sales; the UK ranks modestly at number 13.

• New van registrations rise 6.4% to 14,135 units in February 2018.
• Increased demand sees best February performance in a decade.
• Year-to-date registrations remain steady.

• New van registrations fall -4.2% to 20,475 units in January 2018.
• Demand for medium (2.0-2.5t) vans rises, up 1.2% year on year.
• Double-digit decline for small vans, a -28.9% drop compared with previous year.

From left to right: Pierre Lahutte, IVECO Brand President – Philippe Lambert, CEO of CNH Industrial Capital Europe

Pierre Lahutte, IVECO Brand President declared:

IVECO has a long-standing commitment to sustainable transport. We have pioneered alternative traction technologies for over 20 years with the objective of providing our customers with vehicles that enable them to be more sustainable, while operating profitably. With the Green Finance schemes, we take our commitment a step further, by helping our customers’ energy transition as they make their fleets more environmentally friendly. This initiative with BNP Paribas Leasing Solutions is testament to what can be achieved when two players from different industries join forces for such an important cause.

Charlotte Dennery, CEO of BNP Paribas Leasing Solutions, said:

As part of its 2020 development plan, BNP Paribas clearly indicated its will to strengthen its commitment to the energy transition and the achievement of the United Nations Sustainable Development Goals. As the Group’s specialized entity in equipment finance, BNP Paribas Leasing Solutions is a natural partner to encourage companies to promote responsible equipment.

The financing offer will be available in Belgium, France, Germany, Italy, the Netherlands and the United-Kingdom via IVECO network dealers under the brand “IVECO Capital” by CHN Industrial Capital Europe, a joint financing company between CNH Industrial NV and BNP Paribas Leasing Solutions, partners since 1997 in financing capital goods.

• New light commercial vehicle registrations fall -3.6% to 362,149 units in 2017 – the first decline since 2012, but market still third highest in a decade.
• Demand for pick-ups continues to grow – up 7.8% in 2017 as large van registrations fall -3.1%.
• December van registrations increase 2.9% to 28,016 vehicles.

A vehicle for change?

Before working to reduce your emissions, it’s vital to understand how you can reduce them. This isn’t every dealership’s specialist subject, after all.

There are multiple ways to tackle emissions, but hydrogen-powered and electrically charged vehicles (ECVs) represent a particularly high-profile method. For some time, they represented more theory than reality. Technology, however, has caught up, and if they were once too expensive, impractical, or far-off to integrate into a business model, they are a viable option today. By reducing (and in some cases eliminating) a vehicle’s dependence on petroleum, they also reduce carbon dioxide output and contribute to better air quality.

Several high-profile car manufacturers are working on commercial ECVs in various stages of development. It should come as no surprise that Tesla – which built its brand on electric cars – is making waves in this field: CEO Elon Musk describes its new all-electric Semi truck as a “beast”, with high weight capability and a long range, while a Morgan Stanley analyst describes it as “the biggest catalyst in [the field] in decades”. Nor is it especially shocking that Toyota, which pioneered and popularised the hybrid car, would go completely electric with Project Portal – a hydrogen-powered 18-wheeler that uses an electric motor. 

Other organisations are working on their own prototypes: Mercedes-Benz and Daimler Trucks are collaborating on a prototype Urban eTruck, a pure-battery-electric vehicle designed for urban deliveries, and with a range of 200 kilometres. But this is expected to go into production in the early 2020s, and the other projects mentioned are on a similar timeframe. There are options available on the market right now.

For example, Nissan’s e-NV200 has been on the market since 2014 – becoming Europe’s top selling electric van in 2016. Absent space-consuming components like the internal combustion engine, it’s much easier to maintain and produces no emissions. Several fleets are active today. As of January 2017, Renault’s Pro+ range also offers the fully-electric Kangoo Z.E. and Twizy Cargo.

The question for dealerships is essentially this: if you have the resources, the inclination, and the right mentality, what is preventing you from offering ECVs to your business customers?

Barriers to ECV adoption

Any advocacy of ECVs must come with the caveat that integrating them into an organisation’s fleet will not necessarily be a clean and easy process. There are several barriers to purchase for your customers – and any improvements to air quality will be cold comfort if electric vehicles end up costing significant amounts of money and preventing them from buying more over the long-term.

For instance, the battery life of ECVs remains a serious concern: while it’s improving all the time, performance over long distances is vital for fleet managers. Hydrogen power won’t solve this problem: fuel cells can be less durable than the alternatives, and refuelling stations are scarce. These are problems, and may put off some customers, but time, money, and innovation ought to solve them.

The most pressing issue, however, is perhaps the sheer cost of converting to an environmentally-friendly fleet. There’s no getting around the fact that ECVs are more expensive than their petroleum and diesel-based equivalents. The upfront cost of replacing – or supplementing – a fleet with these vehicles can be daunting for many businesses and organisations. Many could be faced with a painful choice: adapt to a low-emissions era and risk breaking the bank; or fail to do so, and face longer-term consequences in the process.

Helping customer to square this circle should be a priority for dealerships. But how can this be done?

Financing the fleet of tomorrow

Alternative methods of financing fleets have long been available, and they are steadily growing in popularity. In July 2017, The Finance & Leasing Association valued new business in the UK commercial vehicle finance and leasing market at £540 million.

It’s easy to understand why: by reducing the upfront purchase price and spreading it over the cost of a multi-year agreement, leasing removes the biggest barrier to ECV acquisition. It offers both the dealership and the end-user greater flexibility. If, as a dealership, you want to roll maintenance and support into the agreement, you can; if you want to allow your customers to upscale their fleets in accordance with their requirements, you can. As technology leads to the development of more sophisticated ECVS, customers are also incentivised to use leasing as a means of gaining access to the latest vehicles.

Using these finance agreements, dealers are empowered to become eco-friendlier, forge stronger relationships with customers – and give those customers have every reason to come back to them. Leasing also supports the emergence of a ‘circular economy’ – where base materials are reused for vehicles and parts alike. This ensures that natural resources don’t deplete too easily, while vehicles remain affordable. Leasing can support this process by allowing vehicles to be returned and reused.

An age of environmental consciousness, technological innovation, and tightening legal requirements presents unique opportunities and unique risks for the commercial vehicle market. Adapting to this will take effort, initiative, and some degree of open-mindedness. It will nevertheless be worth it. The market has already taken the first steps towards a future where sustainability isn’t just morally and legally necessary, but commercially viable. The rest of the journey will take some time – but it’s better to ride along than to lag behind.

1. 1. Reduced operating costs

Owning a fleet is an expensive business. Like any equipment, your customers’ fleet needs to be kept in shape to keep them in business. Maintenance expenses such as parts, and labour can all add up very quickly. Managing repairs in-house requires hiring a team of well-trained staff and sending vehicles to a supplier for repairs could result in paying over the odds for maintenance.

By outsourcing their fleet purchasing, management and maintenance to you, your customers can significantly reduce their operating costs. Outsourcing means they don’t need to source and manage an in-house maintenance team. This reduces, or even eliminates, a range of their expenses related to payroll and back-office functions – as well as the accompanying administrative HR headache.

2. 2. Increased efficiency

When the responsibilities of ownership are outsourced to a dedicated organisation, your customers and their staff can focus on other company priorities. This can dramatically improve their productivity, efficiency and business results.  

3. 3. Enhanced service and customer satisfaction

Trying to manage fleet scheduling, parts availability, ongoing repairs and other aspects of maintenance in-house, can stretch your customers’ resources to unmanageable levels. When their staff are feeling under pressure, the quality of their  service delivery will suffer – leaving their own customers dissatisfied.

Outsourcing fleet maintenance and management assures your customers – and their customers –  of consistently excellent service. The best fleet maintenance and management companies work to strict industry set standards so the quality of work will be 100 percent guaranteed.

4. 4. Meet legislative requirements

Last but not least, outsourcing fleet management means that your customers no longer need to oversee their legislative requirements. Again, this frees up your customers’ staff to focus on other important business areas and helps keep their business in line with the law.

With ownership comes immense responsibility and expense. As the world turns more and more in favour of leasing, the subscription economy is gaining traction across a range of industries. The benefits for end-users and dealers are clear – improved profits and productivity, enhanced customer satisfaction levels and a greater competitive edge.

BNP Paribas Leasing Solutions UK CEO, Jean-Michel Boyer, speaks to The Telegraph on fleet management and why leasing is more attractive in some circumstances than buying.

To buy or not to buy, that is the question. Over the past decade, the debate has raged with increasing intensity about whether purchasing commercial vehicle fleets outright or leasing them makes the best business sense. And while traditionalists may still favour the former approach, the balance appears to be tipping towards the latter.

Certainly, the most recent statistics generated by The British Vehicle Rental and Leasing Association (BVRLA), the trade body for the sector, highlight the trend for business leaders to opt for leased fleets. The BVRLA represents more than 900 members – who all have to adhere to a code of conduct, which ensures the highest levels of professionalism –  and its Q4 2016 survey indicated the business car-and-van leasing fleet enjoyed a notable 6.6pc year-on-year growth.

“Those numbers comprised a 3.6pc growth in the number of cars, and a 16.2pc increase in the number of vans,” says BVRLA chief executive Gerry Keaney. “And much of the growth in popularity is down to the fact that a new audience of SMEs are jumping aboard.

“Leasing has financial, administrative and operational benefits for businesses, as they can outsource difficult tasks to experienced, dedicated professionals – plus leasing companies are providing customers with access to affordable vehicle finance schemes.”

“Leasing agreements allow businesses to pay VAT on the rental amount, rather than the purchase price” Jean-Michel Boyer, CEO, BNP Paribas Leasing Solutions UK

“Cash is the lifeblood of a business, and buying a vehicle ties up capital in a depreciating asset when it could be invested elsewhere in the business. Many business owners prefer the idea of paying for their transport needs in smaller, fixed, regular instalments rather than one large, upfront sum. Due to their impressive buying power, leasing companies can provide competitive monthly rates.”

Jean-Michel Boyer, chief executive of BNP Paribas Leasing Solutions UK, agrees. “When a commercial vehicle is purchased outright, it immediately loses value,” he says. “An entire fleet which is bought loses value en masse. It’s an inefficient use of cash which for any business – whether it’s an SME or multinational conglomerate – is undoubtedly better spent elsewhere.

“By exchanging large upfront payments for manageable, fixed-term rental instalments over 12 to 60 months, businesses can stay cash-flow positive over both the short and long term. Thanks to predictable costs, businesses can also budget more accurately, and with minimal risk.”

There are other less obvious financial pluses to not purchasing a fleet outright, according to Mr Boyer. “Leasing is – quite literally – less taxing than buying,” he continues. “When someone buys a single commercial vehicle, they must pay 20pc VAT upfront, which can amount to a significant expense for smaller businesses. If you’re buying a fleet of vehicles, these expenses are multiplied.

“By comparison, leasing agreements allow businesses to pay VAT on the rental amount, rather than the purchase price. Asset repayments in a leasing agreement also count as a business expense, resulting in even greater tax efficiency.”

”Leasing lets businesses access the very latest technology without breaking the bank” Jean-Michel Boyer, CEO, BNP Paribas Leasing Solutions UK

Another key factor is that leasing removes the hassle of maintenance. And with technology advancing at speed, why wouldn’t business owners select a modern vehicle with all the latest capabilities that can be upgraded in a couple of years, rather than buying a van or car and having to take a hit on resale when it becomes outdated?

“Contract hire leasing agreements can roll up maintenance costs so that instead of chasing down vehicles for safety inspections, companies can hand over responsibility to a professional organisation,” says Mr Boyer. “Vehicles are becoming more technically complicated and in turn the need for industry-focused support levels have increased, creating an added incentive to pass this responsibility on.

“And, as commercial vehicle sophistication evolves, leasing also provides businesses with the ideal way to access the very latest technology without breaking the bank. Leasing agreements will typically offer flexible end-of-term options, meaning businesses have the ability to upgrade to the latest model without hassle.”

Mr Keaney, offering hope to those lumbered with paid-for vehicles, adds: “SMEs benefit from access to modern, fuel-efficient vehicles every three to four years. If an SME currently has bought vehicles, leasing companies can arrange a sale-and-leaseback deal to convert the entire fleet of owned vehicles to a lease arrangement.”

The BVRLA’s Guide to Vehicle Funding can help businesses choose the most appropriate solution for their circumstances, and a number of the larger manufacturers, including Renault, offer their own financial packages: contract hire; hire purchase; finance lease; and lease purchase.

Given this welter of information, a more appropriate question, then, is: to lease, or not to lease. No prizes for working out the most obvious answer.

Why is leasing a better deal?

If your dealership offers a business van lease option, it will benefit in several ways. Most obviously, it will increase the customer incentive. If a customer is reluctant to make a van purchase because of the high upfront cost, our OptiVan Lease can make the vehicle more immediately affordable.

Where a hire purchase arrangement will require upfront VAT payments for non-VAT registered businesses, an OptiVan Lease will allow them to spread it out across the length of the contract. Being able to reduce their upfront investment is a considerable advantage, and a balloon payment at the end of the contract can keep the monthly repayment figures low and affordable. OptiVan Lease can make your dealership a more attractive option for tentative customers.

OptiVan Lease also gives your customers every incentive to buy brand-new vans instead of purchasing used models. They don’t have to settle for a substandard vehicle with several thousand miles on the clock: OptiVan Lease incentivises them to buy the new model at minimal upfront cost.

Finally, an OptiVan Lease can be tailored to your customers’ unique requirements. If they require a 12 month contract or a 60 month contract the arrangement can be tailored to suit their cash flow.

How dealers can be prepared

OptiVan Lease doesn’t just help you sell more vans: it helps you sell more new vans, and it can sustain your business model for years to come.

That said, you need to be ahead of the curve when it comes to meeting increased consumer demand. Since 2000, the total business population has grown by 59 percent; since 2015 alone, it’s grown by 2 percent. Most of these will be small businesses – in fact, sole traders account for 97,000 of this increase – and catering to these budget-strapped small and micro businesses is a profitable course for your dealership.

They likely already lease their personal vehicle, so there’s every reason to assume they’d be interested in a business van lease. That’s where your dealership comes in, and often it’s simply a matter of reminding them of the benefits they already enjoy when they finance their cars.

Growth drivers

According to the Society of Motor Manufacturers and Traders (SMMT), more vans are hitting the road in Britain than ever before, driving the demand for finance. A record number of vans and pick-ups were registered in 2016, totalling 375,687 and marking the fourth consecutive year of growth.

The ecommerce boom is one factor behind this growth, leading to ever larger numbers of vehicles on the road. Changing shopping habits combined with increased consumer expectations around next-day and even same-day delivery, mean that delivery companies are looking to expand their fleets.

The UK ecommerce market is the biggest in Europe, and the third strongest worldwide. So far this year, UK ecommerce sales rose 12% year-on-year in January, suggesting that the sector’s success is set to continue despite concerns over the devaluation of the pound.

Another factor in play is the increased number of people setting up their own businesses, particularly builders and related trades. These self-employed sole traders are behind increased demand for new vans and, given tight budgets and cash flow worries, they are even more likely to look to finance to help them obtain the best van for their business.

Finance channels

Most businesses secure finance directly, according to the FLA, whilst sales finance through a dealer or reseller is the second most popular channel. However, more and more businesses are turning to brokers to introduce them to the right finance, with a 10% increase in this channel in 2016.

Brokers can play a key part in matching small businesses with the right finance for their business and the most recent data from the British Vehicle Rental and Leasing Association (BVRLA) reveals that leasing brokers’ combined car and van volumes grew by 11% since the end of 2015.

Hire purchase vs. finance lease

The FLA reported recently that UK consumers are turning their back on hire purchase (HP) and instead choosing to lease their vehicles, with hire purchase falling in value by 15% in 2016. It’s likely that this trend will be reflected in small businesses’ purchasing habits.

With HP, the monthly repayments tend to be much higher, and the customer doesn’t have the option of spreading the VAT across the length of the contract. For those that aren’t VAT-registered, this cost can be prohibitive. A finance lease on the other hand has a low upfront cost as it allows small businesses to spread the cost of the VAT. This is a significant benefit for non-VAT registered businesses allowing them to preserve valuable cash reserves for essential investment in order to make money or expand operations.

Budget concerns

Ultimately, budget considerations are critical, especially for small businesses with limited capital. Low monthly payments are often more appealing to cash-strapped businesses than an upfront lump sum.

The right finance can overcome cost objections and help build better, longer lasting relationships between customers, dealers and brokers. Boosting small businesses is key to boosting the wider economy as SMEs account for 99% of companies in the UK, and generate a huge 47% of the country’s revenue. Leasing can help these businesses access the assets they need to succeed, and it’s likely that demand for flexible finance will continue to grow within this market.