Asset finance - White Clarke Group

United Kingdom 

Asset Finance Country Survey

Country report - UNITED KINGDOM 

Acknowledgements 

Brendan Gleeson, global sales and markeng director, White Clarke Group 

Ian McCafferty, chief economic adviser, Confederaon of Brish Industry 

Julian Rose, head of asset finance, Finance & Leasing Associaon 

Chris Stamper, chief execuve officer, ING Lease UK 

Lindsay Town, managing director, Kent Asset Soluons 

Paul Everi, chief execuve, Society of Motor Manufacturers and Traders 

Ellio Lennick, vice president of internaonal sales management, MAN Finance Internaonal 

John Lewis, chief execuve, Brish Vehicle Rental and Leasing Associaon 

Paul Harrison, head of motor finance, Finance& Leasing Associaon 

Roddy Graham, commercial director, Leasedrive Group 

David Beeley, director financial services, Jaguar Land Rover 

Ian Dennis, business development manager, LPM Outsourcing 

Chris Smith, partner, assurance, Grant Thornton 

Alastair Kendrick, director, MHA MacIntyre Hudson 

White Clarke Group (WCG) is the market leader in soware soluons and business consultancy to the automove 

and asset finance sector for retail, fleet and wholesale. WCG soluons enable end-to-end credit processing and administraon 

to streamline business pracce, cut operaonal cost and deliver outstanding customer service. WCG 

has a nineteen year track record of leadership and innovaon in finance technology, consultancy and new market 

entry. Clients value WCG industry knowledge, market intelligence and innovaon. The company employs some 500 

finance and technology professionals, with offices in the UK, USA, Canada, Australia, Austria and Germany. 

White Clarke Group publish the Global Leasing Report, which is part of The World Leasing Yearbook. To order a copy 

of the 32nd edion of the World Leasing Yearbook go to 

hp://www.euromoney-yearbooks.com/default.asp?page=5&pcID=15145 

hp://www.whiteclarkegroup.com/ 

hp://www.asseinanceinternaonal.com 

Publisher: Edward Peck 

Editor: Brian Rogerson 

Author: Nigel Carn 

Asset Finance Internaonal Ltd., 

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London SE3 9XG 

UNITED KINGDOM 

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© Asset Finance International, 2012, All rights reserved 

No part of this publication may be reproduced or used in any form or by any means graphic; electronic; or 

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© Asset Finance International, All rights reserved 

2


Contents 

1.0 Introduction 04 

2.0 Economic outlook 06 

3.0 Asset finance - background 07 

3.1 The vehicle market 08 

3.2 The fleet market 09 

3.3 Vehicle finance 10 

3.4 Consumer car finance 10 

3.4 Light commercial vehicles 11 

4.0 The effect of the current economic situation on the market 11 

5.0 Challenges 14 

5.1 Challenges for vehicle finance 14 

5.2 Growth trends 15 

5.3 Sectors 16 

5.4 International prospects 16 

5.5 Industry consolidation 16 

6.0 The effects of the proposed changes to lease accounting 17 

6.1 Industry perspective 18 

7.0 Taxation 19 


3


Introduction 

The current economic climate in the UK, although still 

bumping along what is to be hoped is the bottom of the 

curve and facing considerable uncertainty in the near 

term, has some positive pointers for the asset finance market 

in general and for leasing in particular. 

The lack of real progress in resolving the sovereign crisis in 

the eurozone and general economic turbulence continue to 

have an adverse effect on the UK business and financial 

markets. However, it should not be forgotten that the UK 

economy is the third largest in Europe and sixth in the world by 

nominal gross domestic product (GDP) and, although under 

threat of a possible downgrade, still has a triple-A credit rating. 

The most problematic factors for doing business in the UK 

Tax rates 17.8 

Access to financing 14.5 

Inefficient government bureaucracy 13.5 

Tax regulations 11.7 

Inflation 9.4 

Restructive labor regulations 8.4 

Inadequately educated workforce 6.8 

Poor work ethic in national labor force 6.1 

Inadequate supply of infastructure 5.0 

Policy instability 4.0 

Corruption 0.9 

Poor public health 0.8 

Foreign currency regulations 0.6 

Crime and theft 0.2 

Government instability/ coups 0.0 

0 5 10 15 20 25 30 

Percent of responses 

Note: From a list of 15 factors, respondents were asked to select the five most problematic for doing business in their 

country and to rank them between 1 (most problematic) and 5. The bars in the figure show the responses weighted 

according to their rankings. 

Source: Global Competitiveness Report 2011-2012; © 2011 World Economic Forum. 


4


In ‘The Global Competitiveness Report 2011-2012’ 

produced by the World Economic Forum (WEF), the UK 

rose to 10th out of 142 countries surveyed, returning to 

the top 10 for the first time since 2007 and indicating 

recovery from the global financial crisis. As can be seen 

in the chart, survey respondents rated tax rates and 

access to financing as the most problematic factors in 

doing business. 

In the World Bank’s ‘Doing Business’ report for 2012, 

the UK comes seventh out of 183 countries in terms of 

‘ease of doing business’ – a drop of one place from the 

previous year. However, the UK is placed first in the 

ranking for ‘getting credit’ – a position it also held in 

2011, although this might come as a surprise to some 

UK businesses that are trying to deal with financial 

institutions which have been generally making credit 

harder to obtain. 

Stage of development 

Global Competitiveness Index 

Rank Score 

(out of 142) (1-7) 

GCI 2011 - 2012 10 5.4 

GCI 2010-2011 (out of 139) 12 5.3 

GCI 2009-2010 (out of 133) 13 5.2 

Basic requirements (20.0%) 21 5.6 

Institutions 15 5.3 

Infrastructure 6 6.1 

Macroeconomic environment 85 4.5 

Health and primary education 14 6.4 

Effciency enhances (50%) 5 5.4 

Higher education and training 16 5.5 

Good market efficiency 19 5.0 

Labour market efficiency 7 5.4 

Financial market development 20 4.9 

Technological readiness 8 6.1 

Market size 6 5.8 

Innovation and sophistication factors (30%)12 5.2 

Business sophistication 8 5.4 

Innovation 13 4.9 

Source: Global Competitiveness Report 2011-2012 

United Kingdom 

Innovation-driven economies 

Source: Global Competitiveness Report 2011-2012 

As credit from banks remains such a major issue for 

many companies, this makes leasing a more attractive 

and viable prospect, particularly for small and mediumsized 

enterprises (SMEs). 

The UK leasing market overall is the second largest in 

Europe after Germany, and the vehicle segment is by far 

the largest. Due to the size and complexity of the market, 

this White Paper will concentrate more on the vehicle 

finance segment of the market. 


5


Economic outlook 

The Bank of England’s most recent quarterly 

inflation report, issued in mid-February, forecast 

that the UK economy will grow by around 1% 

in 2012, although it will “zigzag” in and out of growth 

in the process. Inflation is predicted to gradually fall, 

with the Bank indicating it may fall below 2% in the 

fourth quarter. 

Naturally, worries about the ongoing eurozone crisis 

have affected business confidence. The Q4 2011 

Grant Thornton International Business Report showed 

optimism among UK companies for the economy 

over the next 12 months at -35%, compared to -17% 

for the EU and +1% for the US. However, there is 

renewed confidence from the US and evidence that 

the global economy has avoided the worst of the 

recession, and this sentiment is filtering through. 

The February 2012 economic forecast from UK 

business organization, the Confederation of British 

Industry (CBI), states: “Growth will restart in 2012, but 

high levels of uncertainty around the economic 

outlook, mainly driven by the situation in the euro 

area, mean growth will remain subdued, particularly in 

the first half of this year.” 

The CBI predicts growth of 0.9% in 2012, and 2.0% 

in 2013. Net trade and business investment will 

contribute most to growth, with a rise in exports of 

4.3% in 2012 and 6.4% in 2013. The CBI’s forecast is 

for total business investment of 4.3% for 2012 and 

5.0% for 2013. 

Ian McCafferty, CBI chief economic adviser, says: 

“After a particularly difficult autumn which saw a 

contraction in growth in the fourth quarter, recent 

business survey data in manufacturing and 

professional services has been more encouraging, 

with an uptick in activity and improved business 

sentiment.” 


The WEF’s Global Competitiveness Report 2011- 

2012 comments on the UK: “Although improved 

since last year, the country’s macroeconomic 

environment (85th) represents the greatest drag on its 

competitiveness, with a double-digit fiscal deficit in 

2010 (placing the country 138th) that must be reined 

in to provide a more sustainable economic footing 

going into the future. The situation is made worse by 

the mounting public debt (77% of GDP in 2010, 

120th) and a comparatively low national savings rate 

(12.3% of GDP in 2010, 119th).” 

These are issues facing the Coalition Government. 

In his Autumn Statement in November 2011, 

Chancellor George Osborne announced two 

initiatives to promote lending to firms: 

• A National Loan Guarantee Scheme, making 

£20bn of guarantees for bank funding available 

over two years. The scheme will use low 

government borrowing rates to lend to businesses 

at lower than current rates. Companies with 

turnover of £50m or less will be eligible, which is 

estimated to reduce interest rates payable on 

loans by around 1%. 

• A Business Finance Partnership, making £1bn 

available from early 2012 to invest in SMEs. The 

scheme will initially focus on private sector 

lending to SMEs and mid-sized businesses. The 

Government is to consider options for investing 

through other non-bank channels, and will be 

establishing an industry working group that will 

look at forms of bond issuance. 

Further measures are possible in Osborne’s March 

Budget. 

6


Asset finance – background 

UK Total asset finance business, and extracts of breakdown by asset class 

Dec 2011 % change Q4 2011 % change 2011 % change 

Business equipment finance (£m) 230 +2 550 +9 2,035 +15 

Car finance (£m) 488 +14 1,524 +7 6,208 +4 

IT equipment finance (£m) 230 +55 385 +28 1,145 +8 

Plant and machinery finance (£m) 399 +24 1,039 +21 3,836 +12 

Commercial vehicle finance (£m) 434 +20 1,169 +14 4,359 +22 

Aircraft, ships and rolling stock 

finance (£m) 

39 -67 109 -48 555 -33 

Total excl high value (£m) 1,909 +16 5,200 +14 19,509 +10 

Total FLA asset finance (£m) 2,085 -16 5,600 -5 20,792 +1 

Source: FLA 

Asset finance continues to support business growth 

The Finance and Leasing Association (FLA) is 

the UK industry body for the asset finance, 

consumer finance and motor finance sectors. 

According to the latest FLA figures, asset finance for 

investments of up to £20m (including by SMEs) 

totalled £19.5bn in 2011, an increase of 10% 

compared with 2010 (see Table). 

Commercial vehicle finance amounted to £4.4bn in 

2011, up by 22% compared with 2010; business 

equipment finance was up by 15% to £2.0bn; plant 

and machinery finance by 12% to £3.8bn; IT 

equipment finance by 8% to £1.1bn; and car finance 

rose by 4% to £6.2bn. 

Comparing the channels through which the finance 

was provided, equipment vendors showed the 

strongest growth, up by 20% in 2011 compared with 

2010. Over the same period, finance provided 

through brokers grew by 16%, and finance provided 

direct by the lender was up by 4%. 

Julian Rose, head of Asset Finance at the FLA, 

comments on the figures: “The growth in the use of 

asset finance in 2011 shows just how important this 

type of finance is to UK businesses. We saw growth 

across the board in deals under £20m. Asset finance 

helps small businesses get the equipment they need 

to compete in tough trading conditions. It is an 

affordable alternative source of finance for a huge 

variety of products and equipment.” 

The most recent survey by the FLA indicates 

cautious optimism among respondents. In Q4 2011, 

FLA members provided £2.9bn of new finance to 

SMEs for investment in business equipment. The 

survey shows that 74% of respondents expect an 

increase in lending to SMEs over the next three 

months (up by 6% compared with the last survey), 

and some 77% expect an increase over the next 12 

months. 

In spite of the fall in GDP in Q4 2011, the FLA 

survey shows that 72% of respondents expect 

economic conditions to show a slight improvement 

over the next 12 months, compared with 70% in the 

previous quarter. 


7


With regard to how the current economic situation 

is affecting the asset finance and leasing market, 

Chris Stamper, chief executive officer of ING Lease 

UK, told Asset Finance International: “The change in 

the economic environment has certainly had a good 

part to play in the increase in penetration within the 

asset finance market. With businesses being more 

nervous about their banks’ propensity to renew 

facilities, they inevitably look for different sources of 

funding. Asset finance and leasing is a solid product 

which is a great alternative to the traditional sources 

of finance and is an obvious choice in these tougher 

times.” 

For Lindsay Town, managing director of asset 

finance advisory company Kent Asset Solutions, 

“Liquidity, risk management and strategic fit are key 

drivers in the current market. Risk encompasses 

capital management as well as operational process 

and credit quality. These three core drivers are 

exacerbated to an extent by the current debate 

around accounting standards. Whilst anecdotal 

evidence is pressed into service for many opposing 

views, there is to an extent a weakness in demand for 

new assets in some sectors which depresses the 

ability of lessors to restart growth plans. This also 

means that there is some clear price competition 

from some lessors which, in some cases, seems to 

be a rerun of the less than helpful volume-chasing 

strategies of the ‘pre crunch’ era.” 

The vehicle market 

Figures from the Society of Motor Manufacturers and 

Traders (SMMT) provide some positive indicators for 

the market. In 2011, UK car manufacturing rose 5.8% 

to 1,343,810 in 2011, and the upward trend has been 

continued into 2012. 

Commercial vehicle (CV) output fell by just 1.4% to 

121,312 in 2011. The SMMT forecasts the CV market 

to be “steady” in 2012, ending marginally up on 2011. 

"2011 has been a very significant year for the UK 

motor industry. We have seen a remarkable series of 

investment announcements by global vehicle 

manufacturers, with a total of £4bn of investment 

promised for the UK, securing new model programs, 

production facilities and jobs. Despite the uncertainty 

within the eurozone, these decisions demonstrate 

real confidence in the future of UK manufacturing and 

its role within a rebalanced economy," says Paul 

Everitt, SMMT chief executive. 

New car registrations totaled 1,941,253 units in 

2011, down 4.4% on 2010, but ahead of the 1.92m 

forecast. 

Everitt says of these figures: “Weak economic 

growth will make trading conditions tough in 2012, 

but record numbers of new and updated models 

significantly improved fuel efficiency and exciting new 

technologies will help to encourage consumers into 

showrooms. Business and consumer confidence will 

be the key to a successful year.” 

UK new car registrations, 2011 and % change on 2011 

Year to date Total Diesel Petrol AFV Private Fleet Business 

2011 1,941,253 981,594 934,203 24,456 823,094 1,109,126 99,033 

2010 2,030,845 936,406 1,071,575 22,865 953,005 973,233 99,608 

% change -4.1% 4.8% -12.8% 11.3% -14.1% 4.7% -0.6% 

Market share ‘11 50.6% 48.1% 1.3% 42.1% 52.5% 5.1% 

Market share ‘10 46.1% 52.8% 1.1% 47.2% 47.9% 4.9% 

Source: SMMT 


8


UK van and truck registrations: 2011 and % change on 2010 

Everitt comments: “The van and truck market has 

enjoyed a consistent growth throughout 2011, while 

innovative developments in vehicle design and 

technologies provided solid business reasons for 

companies to upgrade their vehicles.” 

A note of caution regarding the heavy CV market in 

2012 comes from Elliott Lennick, vice president of 

international sales management at captive lessor 

MAN Finance International, who told Asset Finance 

International: “The UK heavy commercial vehicle 

market is not expected to grow over 2011. It may 

even contract, dependent upon the expected Budget 

announcement on fuel tax increase.” 

The fleet market 

2011 % change 

Vans 260,153 +16.7% 

Trucks 42,944 +24.6% 

Total 303,097 +17.8% 

Source: SMMT 

The British Vehicle Rental and Leasing Association 

(BVRLA) predicts that fleet vehicles will dominate the 

car market in 2012, continuing to gain market share, 

and including new registrations which the BVRLA 

says will not reach the total of 1.9m in 2011. 

John Lewis, BVRLA chief executive, told Asset 

Finance International: “Vehicle rental and leasing is 

performing well as road users tend to value their 

associated fixed-cost, low-risk benefits during 

periods of economic uncertainty and financial 

constraint.” 

Lewis continues: “The continued slowdown in retail 

car sales is likely to support strong used car prices in 

two ways. First, it indicates that cash-conscious 

consumers will be looking to buy second-hand 

vehicles instead. Second, the fact that retail sales 

have been slow for a number of years means that 

there is now a shortage of late-plate used vehicles. 

“Both of these factors should have an inflationary 

impact on used car prices, which will benefit our 


members when they come to sell their cars at the end 

of their rental or leasing life.” 

For these reasons, the BVRLA prediction for 

residual values for ex-leasing company cars is that 

they will rise “by up to 5%” in 2012. 

Another factor indicating that favourable returns 

can be expected is that there will be many fewer exfleet 

cars coming to market in 2012 as there was a 

considerable slump in new car fleet sales in 2009 due 

to the recession, so simple supply and demand 

should mean fairly strong residual values (given that 

there is no serious double-dip back into recession). 

Fleet car sales by manufacturer, 2011 vs 2010 

Manufacturer 2011 2010 % change 

Vauxhall 155,711 154,053 +01.08% 

Ford 154,272 157,658 -02.15% 

Volkswagen 108,352 95,666 +13.26% 

BMW 68,827 62,334 +10.42% 

Audi 65,380 57,813 +13.09% 

Peugeot 54,720 60,217 -09.13% 

Nissan 47,877 41,775 +14.61% 

Mercedes 44,243 35,914 +23.19% 

Renault 35,967 46,354 -22.41% 

Toyota 30,954 33,008 -06.22% 

Citroen 30,129 32,069 -06.05% 

Hyundai 27,905 18,610 +49.95% 

Kia 26,096 16,612 +57.09% 

Skoda 21,899 16,763 +30.64% 

Mini 20,998 14,529 +44.52% 

Volvo 19,459 19,257 +01.05% 

Seat 19,061 15,753 +21.00% 

Honda 16,823 23,405 -28.12% 

Mazda 11,898 15,408 -22.78% 

Land Rover 11,008 10,235 +07.55% 

Fiat 10,447 15,224 -31.38% 

Jaguar 6,540 6,102 +07.18% 

Alfa Romeo 5,896 3,502 +68.36% 

Chevrolet 5,816 4,378 +32.85% 

Lexus 4,062 3,123 +30.07% 

Suzuki 2,918 1,032 182.75% 

Mitsubishi 2,689 3,313 -18.83% 

Saab 2,095 2,130 -01.64% 

Smart 1,604 1,913 -16.15% 

Subaru 981 1,088 -09.83% 

Porsche 902 844 +06.87% 

Jeep 675 636 +06.13% 

Chrysler 618 638 -03.13% 

Aston Martin 352 329 +06.99% 

Bentley 347 398 -12.81% 

MG 199 114 +74.56% 

Lotus 195 249 -21.69% 

Infiniti 124 45 175.56% 

Ssangyong 104 17 511.76% 

Maserati 86 96 -10.42% 

Perodua 71 76 -06.58% 

Proton 58 170 -65.88% 

Source: SMMT 

9


Cars bought on finance by consumers through dealerships 

Dec 2011 

% change 

Q4 

2011 

% change 2011 % change 

New cars 

Value of advances (£m) 485 +8 1,596 +10 6,860 +5 

Number of cars 33,090 +4 113,994 +4 517,493 +1 

Used cars 

Value of advances (£m) 406 +5 1,507 +4 6,748 +4 

Number of cars 43,104 +9 163,861 +6 728,971 +4 

Source :FLA 

Vehicle finance 

The latest figures from the FLA show that 2011 was a 

record year for dealer motor finance, with 62.9% of all 

new cars being purchased by consumers using 

dealer finance, almost 10% up on 2010. 

The number of new cars bought by consumers 

using dealer finance in 2011 was up by 1% to over 

517,000 (see Table). Dealer finance also helped 

consumers to purchase almost 729,000 used cars, 

4% more than in 2010. Overall last year, consumers 

purchased almost 1.25m cars using finance provided 

through dealerships. 

Consumer car finance 

The total percentage of consumer car finance 

provided through PCP (personal contract purchase) 

contracts grew in 2011 to 61.1%, compared with 

58.7% in 2010. By contrast, hire purchase fell from 

34% of the market in 2010 to 30.4% in 2011. 

Consumer car leasing accounted for 6.5% of the 

market, and continues to grow year-on-year. 

Business car finance volumes fell by 2% in 2011 

compared with 2010, although Q4 2011 saw growth 

of 6% in the business new car finance market 

compared with Q4 2010. 

Cars bought on finance by businesses 

Dec 2011 

% change 

Q4 

2011 

% change 2011 % change 

New cars 

Number of cars 29,617 +13 91,925 +6 374,323 -1 

Used cars 

Number of cars 6,369 +66 12,119 +24 44,548 -7 

Source :FLA 


10


Light commercial vehicles 

In the light commercial vehicle market, figures from BCA show that in the fleet and lease LCV sector 

average values have stepped up noticeably in the past five months. 

LCVs - Fleet and lease used values, 2009-2011 

£6,000 

Jan 

Feb 

Mar 

Apr 

May 

Jun 

Jul 

Aug 

Sep 

Oct 

Nov 

Dec 

Jan 

Feb 

Mar 

Apr 

May 

Jun 

Jul 

Aug 

Sep 

Oct 

Nov 

Dec 

Jan 

£4,981 

£5,107 

£5,126 

£5,176 

£5,073 

£4,909 

£4,830 

£4,757 

£4,831 

£4,882 

£4,602 

£4,465 

£4,785 

£4,599 

£4,589 

£4,521 

£4,671 

£4,613 

£4,683 

£4,651 

£5,041 

£5,111 

£5,047 

£4,998 

£5,108 

£5,000 

£4,000 

£3,000 

£2,000 

Source: BCA, © BCA 2005-2012 

How the current economic situation is affecting the market 

Paul Harrison, head of Motor Finance at the 

FLA, told Asset Finance International: “The 

statistics we collate on behalf of finance 

providers allow us to compare demand for vehicle 

finance by businesses throughout the credit crunch 

and economic downturn. In 2011, 1% fewer new 

cars were financed than in 2010 for businesses – 

the total number of new cars financed was 374,323. 

But 2010's figures saw 1% more new cars financed 

than in 2009.” 

“The market for business new cars has been 

essentially flat over the last three years, though 

there was a drop in business demand of 20% in 

2009 compared with 2008, the latter being a good 

year for the motor finance market. 

“So, while the market has been affected by 

current economic events, much of the volatility 

experienced at the start of the credit crunch has 

eased and over the last three years new car 

business financing has consistently been at around 

380,000 units.” 

The economic climate is nonetheless changing 

the general layout of the vehicle leasing market. 

Banks are being pushed back to their core activities 


and some of the leading UK leasing companies that 

had been owned by banking groups have been sold 

– ING’s leasing operations Europe-wide were 

bought by BMW-owned Alphabet; Ally Financial 

divested itself of Masterlease UK, which was 

acquired by Leasedrive; and most recently ALD 

Automotive has agreed with RBS to take over 

Lombard Vehicle Management. This follows similar 

moves in the last two years from Barclays, 

Santander and Clydesdale Bank. 

The latest amalgamation involving ALD and 

Lombard will mean a further change to the top of 

the leasing league table, the FN50 produced by 

Fleet News (see Table), and the view of the industry 

is that further consolidation is inevitable. 

The fact that three of the top five will still be bankowned 

(Lex Autolease by Lloyds Bank, Arval by 

French bank BNP Paribas and ALD by another 

French bank, Société Générale) does not detract 

from the overall tendency for banks to pull back 

from non-core activities, and the fact remains that 

these banks may look to reduce their involvement if 

the financial crisis continues, particularly in the 

eurozone. 

11


Fleet size UK - 2011 compared to 2010 

Pos Prev Company Fleet size 

Fleet 

(prev yr) 

Parent 

1 1 Lex Autolease 280,218 307,133 Lloyds Banking Group 

2 2 LeasePlan 130,200 123,862 LeasePlan Corp. 

3 9 Alphabet 99,154 47,176 BMW 

4 4 Arval 86,154 80,753 BNP Paribas 

5 3 Lombard Vehicle Management 70,621 81,000 RBS 

6 5 ALD Automotive 63,561 56,592 Societe Generale 

7 6 Daimler Financial Services 55,004 50,233 Daimler FS 

8 7 Volkswagen Group Leasing 49,437 47,700 Volkswagen FS 

9 11 Arnold Clark FInance 49,339 41,987 Arnold Clark Auto. 

10 10 GE Capital Fleet Service 43,495 45,704 GE 

11 19 Leasedrive Group 35,659 15,200 Privately owned 

12 14 Htatchi Capital Vehicle Solutions 33,375 30,734 Hitatchi Capital (UK) PLC 

13 15 Inchcape Fleet Solutions 22,455 23,135 Inchape PLC 

14 18 Zenith 22,136 19,990 Privately owned 

15 16 Citroen Contract Motoring 21,758 22,162 Banque PSA Finance 

16 17 Peugeot Contract Hire 20,947 20,067 Peugeot Motor Company 

17 22 Pendragon Contracts 13,167 12,024 Pendragon PLC 

18 20 Toomey Leasing Group 12,992 14,561 Laindon Holdings 

19 24 Ogilvie Fleet 10,130 9,515 Ogilvie Group 

20 26 Days Contract Hire 9,487 8,627 CEM Day 

21 25 Venson Automotive Solutions 9,442 8,977 Premier Fleet Management 

22 27 Grosvenor Contracts Leasing 8,992 8,514 Grosvenor Contracts Leasing 

23 29 Tuskerdirect 6,706 6,361 Smedvig Capital 

24 35 Toyota Financial Services 6,191 4,730 Toyota Financial Services (UK) 

25 30 JCT600 Contracts 5,892 5,576 JCT600 

26 34 Fleet Hire 5,800 5,300 Fleet Hire Holdings Ltd 

27 28 BMW Financial Services 5,621 7,042 BMW AG 

28 33 Marshall Leasing 5,570 5,325 Marshall of Cambridge 

29 31 Carillion Fleet Management 5,500 5,500 Carillion PLC 

30 32 TCH Leasing 5,431 5,420 TC Harrison Group 

31 36 Motiva Vehicle Contracts 4,313 4,720 Motiva Group 

32 37 Apex Easy Fleet 4,165 3,550 Apex Car Rental 

33 N/A Agnew Corporate 3,500 N/A N/A 

34 42 Sandicliffe Motor Contracts 3,110 2,977 Sandcliffe Motor Holdings 

35 41 Fleet Financial 3,101 3,064 Management owned 

36 39 MNH Platinum 3,050 3,500 Management owned 

Source: FN50 


12


Fleet size UK - 2011 compared to 2010 (continuted) 

Pos Prev Company Fleet size 

Fleet 

(prev yr) 

Parent 

37 40 FGA Contracts 2,857 3,430 Fiat Group Auto. Fin. Serv. 

38 N/A OVL Group 2,800 N/A N/A 

39 N/A DFC 2,773 N/A N/A 

40 45 Sinclair Finance & Leasing 2,730 2,350 Sinclair Motor Holdings 

41 40 Lookers Leasing 2,074 1,872 Lookers PLC 

42 N/A SG Fleet 2,023 1,840 Super Group Limited 

43 46 Hilton Vehicle Leasing 1,673 1,437 Privately owned 

44 47 Windsor Vehicle Leasing 1,629 1,438 Aureole Windsor 

45 49 Translinc 1,570 2,612 Senturion Group 

46 48 Fraikin 1,410 N/A N/A 

47 43 Agility Fleet 1,339 N/A N/A 

48 N/A Prohire 1,257 N/A N/A 

49 50 Fulton Leasing 1,216 1,417 Management owned 

50 N/A Burnt Tree Vehicle Leasing 967 N/A N/A 

Source: FN50 

Roddy Graham, commercial director of 

Leasedrive Group and chairman of the Institute of 

Car Fleet Management, told Asset Finance 

International that more non-banks are likely to 

enter the market as funders rather than players 

(such as Investec, in partnership with Leasedrive), 

as they feel the margins are sufficiently robust to 

come in and stay. “This,” Graham says, “should 

mean the overall customer experience will 

improve, as the essential service providers will be 

to the fore.” 

The viewpoint of a manufacturer-owned lessor 

is provided by David Betteley, director, financial 

services, Jaguar Land Rover (JLR), who told 

Asset Finance International: “We believe that the 

premium market will continue to outperform the 

general market and the winners will be those 

manufacturers that are product/led rather than 

price/deal led.” 

In the commercial vehicle market, according to 

Ian Dennis, business development manager at 

LPM Outsourcing, the reduction in funding by 

many banks has led to an increase in activity 

from manufacturer-owned captive finance 

companies. 

He told Asset Finance International: 

“Manufacturer-owned captives are stepping into 

the breach left by the retrenchment of some of 

the mainstream banks. Some banks are turning 

down an increasing amount of new business 

applications to fund commercial vehicle 

investment. That means that manufacturers can’t 

sell their products – and businesses can’t get the 

new fuel-efficient vehicles they need.” 


13


Challenges for the asset finance industry 

Asset Finance International: “In my view the key 

challenges are around managing stakeholders and 

risk. Stakeholders need to see demonstrable value in 

the industry and in turn the industry needs to 

manage risk in several guises. In particular, there is a 

need to focus on concentration risk through more 

effective distribution and liquidity management and 

also to focus on operational risk to ensure that 

increasingly streamlined and automated processes 

don’t impair the fundamental risk guides for the 

business.” 

The main challenge in the near term as 

perceived in the market is the macro economy, 

with the need for a return of relative stability 

and business confidence so that inward finance and 

investment are maintained and liquidity is built up. 

This economic environment and the very real 

possibility of returning to recession will obviously be 

at the forefront of concerns over the next 12 months. 

This, coupled with the lack of available capital and 

relatively low demand, will mean that 2012 will 

continue to be a testing time for the asset finance 

marketplace. 

The point of view of a bank-owned lessor is given 

by Chris Stamper of ING Lease, who says: “One area 

keeping us focused as a business is the knowledge 

that mainstream lending will eventually become more 

readily available again. There is a proved cycle of 

businesses using asset finance when bank lending is 

constrained, then when economic situations 

improve, reverting back to their banks – possibly 

because even with the increased culture of finding 

the best deal, people find it easier to work with one 

person for all their financial requirements. Although 

aware of the benefits of asset finance, business 

funders will always need to work with businesses 

during more buoyant economies to encourage them 

to use this option.” 

Another important area of concern centres on 

industry stakeholders and risk management, as put 

by Lindsay Town of Kent Asset Solutions, who told 


Challenges for vehicle finance 

Making the most of the available funding and 

reducing costs in a cost-conscious market are two of 

the most important challenges for the vehicle leasing 

segment. Return on investment will be seen from the 

introduction of top-grade fleet management 

systems, integrated solutions and the recruitment of 

talent. 

Paul Harrison of the FLA gives the asset finance 

viewpoint: “Now is the time for vehicle leasing and 

rental providers to get the basics right. Ensure offers 

are affordable for businesses and compelling enough 

to convince managers that ‘now’ is the time to invest 

in new vehicle fleets. This should be backed up with 

first-rate customer care and service. If the basics are 

right then providers will be well placed to grow as 

economic circumstances improve. Fleet financing 

will always be needed as companies need to buy 

and renew fleets, but it is a hugely competitive 

market so providers need to stand out from the 

crowd.” 

The leasing and rental viewpoint is provided by 

John Lewis of the BVRLA who said: “The first main 

challenge is funding, which has become scarcer and 

more expensive since the credit crunch and the 

resulting banking crisis. Thankfully, we are now 

seeing an influx of new funders that should more 

than offset the gradual withdrawal of Lloyds Banking 

Group from our sector.” 

Lewis told Asset Finance International that 

insurance is another main challenge that has been 

increasingly problematic, particularly in the rental 

market: “Our rental members have been hit by some 

very high premiums for their self-drive hire insurance. 

14


This is not an isolated problem and it is not a 

surprise that the government is trying to address the 

widespread issue of soaring motor insurance 

premiums. However, the BVRLA is working with 

members, insurance brokers and representatives 

from the insurance industry to understand the issues 

and identify what we can do to assist.” 

For manufacturer-owned lessors, the 

macroeconomic situation continues to be a 

challenge. There needs to be a focus on bad debt as 

well as costs, to ensure that businesses remain 

strong. 

A number of the top vehicle lessors that are 

manufacturer-owned have finance units that in turn 

have banking licences, so they can raise finance 

through bonds. The European carmakers can now 

also access European Central Bank (ECB) finance 

through the ECB’s longer-term refinancing operation 

(LTRO). Among them, RCI Banque (Renault), BMW 

Finance, Banque PSA Finance (Peugeot Citroën), 

FGA Capital (Fiat) and VW Finance have either 

issued bonds in the last few weeks or are 

considering accessing the LTRO. 

At the top end of the car market, the challenges 

are seen to be the eurozone (the potential Greek 

default still affecting markets) and the continuing 

impact of legislation on financial services and also 

regarding CO2 emissions. (See also the later section 

on taxation issues.) 

Changes in emission standards are also viewed as 

a prime issue in the coming year for the commercial 

vehicle market. Elliott Lennick, of MAN Finance 

International, points to the creditworthiness of 

lessees as another challenge for the near and 

medium term. 

The challenge for manufacturers’ captives in the 

commercial vehicle market, as seen by Ian Dennis of 

LPM Outsourcing, is to take on more of the financing 

and to “fill the hole left by the withdrawal of lending 

from some banks.” 

Growth trends 

The immediate prospects for growth in the UK asset 

finance market and in particular in vehicle leasing are 

cautious, but encouraging. Few industry insiders are 

confident about what the coming 12 months will 

bring; however, the experts are agreed that there will 

be a slow recovery. 


Chris Stamper of ING Lease says: “It’s really 

difficult to say how the leasing and asset finance 

market will perform during 2012. I don’t think that 

we’ll see much movement on last year as we’re 

experiencing similar economic conditions. 

Businesses are still looking for alternative ways of 

financing capital equipment, so funders are in a 

good position.” 

As for growth areas in vehicle finance, in the 

opinion of John Lewis of the BVRLA: “The growth 

areas are in SME leasing, salary sacrifice plans 

and where people are coming out of traditional 

cash-for-car schemes. Also, the concerted push 

by manufacturers to tap the fleet market will create 

growth.” 

Salary sacrifice is generally seen as an area with 

growth potential for company cars. Such schemes 

provide savings on income tax and National 

Insurance contributions, outweighing benefit-inkind 

contributions, and given that the majority of 

middle-ranking employees are facing frozen 

salaries or minimal increases, they will be keen to 

consider options that are tax-efficient and help 

make their money go further. 

A combination of factors, including the great 

strides made by manufacturers in reducing CO2 

emissions and increasing fuel consumption, along 

with greater model choice and manufacturer 

incentives, means that firms are viewing the 

company car as a cheaper, greener option than 

the cash-for-car alternative. 

Paul Harrison of the FLA says: “The markets are 

at similar levels to the last two years in terms of 

fleet leasing. It's likely that there is a steady level 

of new business derived from fleet managers 

renewing their fleets every few years so that they 

have reliable cars which allow their staff to perform 

their jobs.” 

Roddy Graham of Leasedrive considers the 

company car market has “a robust base and is 

sustainable, especially with steady growth over the 

coming years.” 

The continuing high worldwide oil price remains 

a major problem and potential growth inhibitor, at 

least in the commercial vehicle market. In the fleet 

car market this may continue the trend for 

downsizing; in the longer term, this may 

encourage moves to electric vehicles (EV), which 

15


of course is being encouraged by the UK 

government and the Department for Transport. EV 

will definitely grow, but progress, like the vehicles, 

will be quiet and gradual. 

Sectors 

In the view of industry experts surveyed by Asset 

Finance International the fleet car market is and 

should remain relatively strong. The small-tomedium 

premium car segment is favoured, for 

being tax- and fuel-efficient. Manufacturers will 

aim more to tap the fleet market, and captive 

finance operations will develop their products to 

offer more value-added services. 

Service providers will need to ensure that 

finance is available for vehicle leasing, as a 

number of brokers were put out of business in the 

recession. Cost will always be an issue and value 

will continue to be closely examined – areas 

which lessors will need to maximize on behalf of 

clients. Larger businesses, which can access 

liquidity relatively easily, will benefit. 

Roddy Graham emphasizes that outsourcing is 

a trend that will continue, where medium-sized 

and larger companies will be able to concentrate 

on their core activities and leave fleet 

management to specialist companies that have 

the right talent, expertise and technology: “It’s not 

just about supplying a car.” 

Another angle was given to Asset Finance 

International by Paul Harrison of the FLA: 

“Commercial vehicle finance has seen 20% 

growth in 2011 over 2010's figures – this is the 

sector that is performing best. Business car 

finance has not recovered to pre-recession levels, 

so it may be that there is pent-up demand there 

which will become apparent when prospects 

improve.” 

The heavy commercial vehicle market will likely 

remain much the same in terms of actual size, 

although Elliott Lennick sees the possibility of 

growth in the leasing market due to changes in 

the way banks lend, brought about by constraints 

following the financial crisis. 

In other areas requiring equipment finance, the 

construction industry in the UK is still depressed, 

although there has been an increase noted in the 

leasing of agricultural machinery. 


International prospects 

Prospects for overseas growth for UK lessors, at least 

outside the EU, in which many already have group 

connections, are seen as limited. For the premium 

end, there is potential in the development of the 

leasing market in China. For the commercial vehicle 

manufacturer and lessor, the countries of interest are 

Russia, Central and Eastern Europe and India. 

Lindsay Town says: “I do see growth in the medium 

term, both in the UK and elsewhere. In part, growth 

will come from substitution, as leasing and asset 

finance fills a less attractive bank debt market. 

However, in certain economies, domestic legislation 

and recognition of lessor rights will need to improve 

to allow material sustainable growth to occur.” 

He added: “I also see the medium term being far 

more the province of the vendor finance distribution 

route, partially due to less interest in the ‘high value’ 

markets and also due to the perceived demand. The 

effectiveness and efficiency of the ‘vendor’ model will 

in my view be one of the key driving forces for future 

success.” 

Chris Stamper sums up: “Asset finance will always 

be there as a genuine option for businesses. As long 

as arrears levels remain low, the only thing 

constraining growth in the industry is the lack of 

capital expenditure.” 

Industry consolidation 

With regard to merger and acquisition (M&A) activity 

in the industry in general, Lindsay Town told Asset 

Finance International: “M&A does happen, but far 

less than one may consider is likely. In part this may 

well be due to a mismatch between vendor and 

buyer expectations. Over the near to medium term I 

suspect that expectations will come closer together 

and deals of various sizes will become more common 

for a period till the ‘new’ ownership map of the 

industry stabilizes.” 

As discussed, there has been a degree of 

consolidation in the vehicle leasing market. The 

opinion of the BVRLA is that there will be further 

consolidation, “but not major.” 

In the view of Paul Harrison of the FLA, “Turbulent 

market conditions could lead to yet further 

withdrawals and consolidation.” A more strident view 

comes from Roddy Graham: “Will there be 

consolidation? You bet.” 

16


Lease accounting - everything’s coming on balance sheet 

Chris Smith provides an update on the 

accountancy issues facing lessees and lessors 

The saga of lease accounting under International 

Financial Reporting Standards (IFRS) continues 

with a revised Exposure Draft expected in Q2 

2012. For the enthusiasts among you, the current 

situation is as follows. 

Lessees 

• A lessee would recognize an asset for its 

right to use the underlying asset, for example a 

car, and a liability to pay rentals. 

Lessors 

• Where the lessor transfers significant risks 

or benefits, the de-recognition approach would 

apply, whereby all or part of the underlying asset, 

again for example a car, would be de-recognized 

and a right to receive lease payments recognized 

as an asset. 

• Where the lessor retains exposure to 

significant risks or benefits, the performance 

obligation approach would apply. Under this 

approach the asset in question remains on the 

balance sheet of the lessor and an additional asset 

is recognized for the right to receive lease 

payments. A corresponding liability would also be 

recognized, representing the obligation of allowing 

the lessee to use, in this instance, the car. 

• Under the performance obligation 

approach it is proposed that the net total of these 

three items would be presented as a single 


amount in the balance sheet with disclosure in 

the notes. 

What does it all mean? 

The fundamental change to lessee accounting is 

that the majority of operating leases will now come 

on balance sheet. Those companies with a lot of 

operating leases will have to bring them all on 

balance sheet (there is currently an exemption for 

certain short-term leases, being 12 months or less) 

with an associated liability. Such changes are likely 

to affect key performance indicators, e.g. debt-toequity 

ratios, returns of capital, as well as 

borrowing facilities and loan covenants. 

From the lessors' perspective, the impact is likely 

to be less significant overall – although there will 

need to be a lot of judgments and disclosures 

around whether the de-recognition or performance 

obligation approach is taken. 

The key issue for lessors will be in understanding 

how the changes will affect their customers in 

terms of their ability to meet, for example, loan 

covenants and their ability to maintain borrowing 

facilities. If the changes make this more difficult, 

how will it affect a customer's ability to enter into 

future contracts? 

To date, this fundamental change, whilst much 

debated within the profession and among lessors, 

has not been on the radar of many lessees. It 

should be. 

Chris Smith is a partner, assurance, Grant 

Thornton. 

17


Industry views of lease accounting changes 

According to research from Grant Thornton’s 

international business report, only 44.1% of 

UK businesses were aware of, and therefore 

prepared for, moving all but short-term leases onto 

the balance sheet. Of those that were aware, only 

46% were supportive of the changes. 

Within the transportation sector, one of the areas 

that will be most affected, 53% of businesses were 

not aware of the potential lease changes. The impact 

will be particularly felt in the rail sector, as the 

standard financing structure used by the industry in 

the UK to purchase rolling stock has followed an 

operating lease structure (Source: Grant Thornton 

IBR 2011). 

Adviser Lindsay Town comments on the way 

legislation and regulation are affecting leasing 

operations: “The impact of Basel III, CRD IV and the 

promise of accounting changes has made some 

lessor owners question their strategic rationale to 

remain at the centre of the asset finance industry. The 

impact of these changes, together with the current 

fragile market conditions, make lessors somewhat 

prey to strategy shifts at the key stakeholder level and 

highlights some of the UK industry vulnerabilities – in 

particular its ability to manage capital and liquidity in 

a more efficient manner as well as project its correct 

image as a frontline supporter of economic recovery.” 

Asked by Asset Finance International whether the 

ongoing impending changes in the way leasing is to 


be accounted is causing uncertainty in the vehicle 

sector, the FLA’s viewpoint is given by Paul Harrison: 

“The International Accounting Standards Board 

seems to be listening to our concerns and we are 

expecting its next version of the proposed new rules 

to be far more workable, so although some 

uncertainty remains it’s certainly less than this time 

last year.” 

To the same question, John Lewis of the BVRLA 

says: “No. First, the lease accounting proposals are 

still some way away from being agreed, let alone 

adopted, and the BVRLA has successfully lobbied to 

reduce most of the extra administrative burden 

associated with them.” 

“Second, these proposals will only affect 

companies that account to international financial 

reporting standards. Even then, these companies are 

used to identifying their lease liabilities in the notes to 

accounts, where they are publicly available.” 

Finally, the viewpoint of a major car lessor is 

provided by Roddy Graham of Leasedrive, who says 

that the accounting changes are not particularly 

important. In his view, fleet management is the same 

regardless of the financing option and whether it is 

accounted for on or off the balance sheet. 

18


Taxation – the screws start turning on the 

company car in the UK 

Alastair Kendrick highlights taxation issues facing 

company car users and lessors 

Recently, many in the leasing industry have 

been waking up to the fact that in April 2012 

the special rules that had been put in place 

for cars with a CO2 emission below 120g/km 

cease to apply. Added to that, there is already in 

place a gearing-up of the level of benefit-in-kind 

on company cars year on year to April 2014. 

We expect the Chancellor to announce what will 

happen after April 2014 in the March Budget. 

Given the rules already in place, we will see the 

benefit-in-kind on 120g/km increase from the 

current level of 10% of the list price (13% for 

diesel) in the current tax year to 16% in 2013/14 

(19% for diesel). 

The first time that many will be aware of these 

changes will be when they get taxed on their April 

salaries, and in these hard times one can only 

anticipate the annoyance that will create for many 

individuals. Perhaps the group that will be most 

annoyed will be those employees who have taken 

low-emission cars via a salary sacrifice car 

scheme and, in addition to the taxable benefit, are 

taking a salary reduction to cover the employer's 

cost of leasing the car. In fact, many of these 

arrangements may no longer be financially viable. 

There will clearly be concerns if those entering into 

these arrangements did not alert their employees 

to this hike in tax when the scheme was launched. 

Increasing benefit-in-kind 

What we expect to be announced in the Budget is 

possibly further increases in the level of benefit-inkind 

from April 2014. Some experts suggest that 

these increases may be fairly significant. It is clear 

that the UK Government intends to use the 

benefit-in-kind charge to incentivize manufacturers 

to produce lower CO2 emissions. It will be 


interesting to see if there is an attempt to reduce 

the 160g/km which determines the level of capital 

allowances that can be claimed on the vehicle. 

The 160g/km is also used to determine for 

employers leasing a vehicle the tax relief they can 

claim against their profits for leasing costs. If the 

CO2 emissions exceed 160g/km then there is a 

15% restriction. It is possible that we will see the 

160g/km reduced to 140g/km, possibly from 2014. 

Implications for leasing 

Those involved in the leasing industry in the UK 

will be concerned at the impact these tax changes 

may have on company cars. Over recent years we 

have seen the numbers of company cars reduce 

significantly. There were 1.83m company cars in 

the UK in 1988/89 and this reduced to 1.37m in 

2002/03 and now is believed to be in region of 

900,000. 

We are aware that there was the expectation 

within the UK leasing industry that the introduction 

of the health and safety rules relating to employee 

travel may make employers decide to no longer 

allow those ‘essential car’ users to move into a 

cash allowance. It was believed that this would 

help with the growth in company car numbers. In 

practice, we are not seeing this having any 

significant impact on company car numbers. 

Given the changes to the levels of benefit-in-kind 

on company cars which take place from April 2012 

with the further increases proposed for April 2013, 

employers need to review their car policy. This 

review may mean they move to lower CO2 

emission cars and thereby reduce the taxable 

benefit increases, or possibly for some nonessential 

company car drivers, offer a cash 

alternative. 

Alastair Kendrick is a specialist in company car 

taxation. He is a director in MHA MacIntyre 

Hudson. 

19

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