What is the rental market?
The car leasing market is an alternative way for a business or individual to access a new car, without having the capital to purchase one.
Leasing a car is often considered a more affordable option than buying a car, mainly because you can select, within reason, the car you’d like to drive, the cost of which is taken as a flat monthly fee.
At the end of the lease (normally 3 years, depending on the age of the car) the car is replaced with a new model if the contract is renewed.
Is it a stable market?
Unlike owning a car, the leasing company takes into account the depreciation of the vehicle; as such, there is no risk involved later on. This appeals to business owners, as not only can tax liability be accurately forecast, but also economies of scale are realized with large fleets of rental cars.
It is widely predicted in the auto industry that within the next 10 to 15 years, leasing a car will be the norm, and most of us will avoid the expense of a new car to follow this trend.
market trends
Following this prediction, previous market trends have shown that there is a slowing down in the decline of the UK used car market. Compared to the year-on-year drop in new car sales of 26.6%, the used car market only fell 5.9% in the first half of 2010.
Over the past decade, the UK used car market has grown by a combined 7%, despite the negative media attention it attracts and inconsistent promotion from vehicle manufacturers.
According to these figures, the steady demand for used cars has helped franchised dealer networks weather the storm; this is before the long-awaited scrapping incentive program came to light.
According to research firm Trend Tracker, nearly four used cars were sold for every one new in 2010.
The effect on the rental market
More than half of the demand for new cars is corporate; therefore, this change in purchasing behavior has led to a change of course on the part of the leasing companies themselves. It is now encouraged to keep the car after the 3-year contract ends, as this will help combat the reduction in the number of contracts available, as well as reduce potential losses that would result from disposing of vehicles.
So who is the target market?
Originally the domain of corporations and large businesses, it is now becoming more and more common for the individual to choose a rental car. In the same case, commercial customers have not decreased, but there has been a shift towards more economical and environmentally sound models.