BVRLA News
www.bvrla.co.uk January 2010
The newsletter of the British Vehicle Rental and Leasing Association
Securing finance: your new year’s resolution by John Lewis The UK economy faces a “weak and fragile recovery” over the next two years, with economic output still failing to hit pre-recession levels by the end of 2011. In its latest forecast, the CBI warns that the first half of 2010 will be a “difficult” period, with more job losses, wage freezes and the inflationary impacts of the VAT rise. None of this paints a rosy picture, but after the 18 months we have had, it is probably one that most of us will gladly accept. But what is the outlook for the vehicle rental and leasing sector? The recession and economic uncertainty that hit the world in 2009 had a dramatic effect on fleet activity. Companies took vehicles off the road, put off decisions and a significant proportion of contracts were extended. Now that business confidence is growing and economic activity is on the increase, some fleets will need to expand. Organisations can’t keep extending contracts indefinitely, although longer leases may become the norm for many. There are two other factors that will have a dramatic impact on vehicle rental and leasing in 2010 – residual values and funding.
A sustained rebound in car and, to a lesser extent, van residual values during 2009 prevented a bad year from becoming an awful one for many members. This strong used-vehicle market was largely a by-product of weak demand for new cars, vans and trucks, coupled to reduced usedvehicle supply. Manufacturers expect new registrations to remain below pre-recession levels for the next couple of years, creating an ongoing shortage of high-quality used stock. This can only help to strengthen residual values going forward. The funding environment is easier to predict. It was our biggest challenge during 2009 and it will stay that way. Much of the liquidity lost when key banks pulled out or drastically reduced their exposure to our market has not been replaced. Finance will remain expensive, scarce and difficult to access for the foreseeable future. We would advise members to seek alternative sources of funding where they can. No doubt 2010 will spring many more surprises for members – hopefully good ones. But I can make one final prediction with certainty. Regardless of what happens to the economy and who wins the forthcoming election, your trade association will continue to promote your interests and deliver the information, advice and services you need to help run your business. ■ John Lewis: discussing industry issues with the BVRLA head of legal services, Jay Parmar
bvrla.co.uk
In this issue Leasing brokers improve their code A stronger code of conduct reflects higher sector standards page 3 MEP backs BVRLA on key EU issues A new ally in Brussels backs the BVRLA’s views on block exemption page 3 Government lures electric vehicle buyers Further support for early adopters of electric vehicles was pledged in the Pre-Budget Report page 4 Get to grips with Euro 5 technologies Do you know how manufacturers will meet this emission standard? page 4 Brains and Brawn at inaugural conference Industry figures and experts gathered at the first ever BVRLA Industry Conference last month page 5 VAT place of supply rules change There’s been a major switch to where VAT is payable on services page 5
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BIG EVENT BIG NAMES The BVRLA annual dinner: 3 March 2010 www.bvrla.co.uk Frankie Boyle: speaker, 2010
Comment Each January people return to work after the festive season hoping to get their year off to a good start and we hope that the advice and information in this issue of BVRLA News helps your business hit the ground running. If you haven’t done so already, you should book your tickets for the BVRLA Annual Dinner on 3 March. With less than 60 days to go and under 150 places left, you’ll need to act fast to confirm your attendance at our industry’s ‘Big Event’. Time is also running out for entries for our Industry Achievement Awards. The deadline for you to nominate any unsung heroes is 22 January – just post or email us the details of the staff member who worked wonders for you in 2009. Editor Toby Poston, toby@bvrla.co.uk 01494 545700 Production Manager Steven Prizeman, steven@bvrla.co.uk 01494 545710 Advertising Nora Leggett, nora@bvrla.co.uk 01494 545713
Leasing brokers improve sector’s code of conduct The BVRLA Leasing Broker Committee has strengthened its code of conduct as part of its efforts to improve standards of professionalism and customer service in the sector. The enhanced code, which took effect from 1 January, places more emphasis on after-sales service and requires all BVRLA leasing broker members to play an active role in dealing with customer queries and complaints. It asks them to provide clear guidance on how cancellations are made and communicated, together with details of circumstances in which a customer may be liable for a cancellation charge. The updated code also requires broker members to make the full terms of any business they sign available to the leasing company that is funding the deal, in order to improve transparency and to raise standards. “The Leasing Broker committee has been instrumental in helping us make
these necessary changes to the code of conduct,” said John Lewis, chief executive of the BVRLA. “This revised code reflects current business practices and legislation and will instil greater confidence among our member’s customers.” The strengthened leasing broker code of conduct is the first of a series of measures that the BVRLA is implementing to improve broker standards. The association is looking to introduce a new accreditation process for leasing broker staff and a set of best practice guidelines for customer service, focusing on whole-life contract management, including the end-of-lease period. Created in autumn 2007, the BVRLA Leasing Broker Committee has concentrated much of its effort on improving customer service, with some promising results. The percentage of leasing broker members subject to complaints referred to the BVRLA Conciliation Service has fallen from 13% in 2008 to 5% in 2009. n
© Copyright BVRLA 2010 BVRLA News articles may be used copyright free by members provided that an acknowledgement is given.
BVRLA River Lodge, Badminton Court Amersham Buckinghamshire HP7 0DD T 01494 434747 F 01494 434499 E info@bvrla.co.uk W bvrla.co.uk Honorary Life President Freddie Aldous Chairman Kevin McNally Vice Chairman Nigel Stead Honorary Treasurer Brian Back Chief Executive John Lewis
BVRLA News | January 2010
MEP backs BVRLA on key EU issues The BVRLA has found a valuable ally in Brussels as it works to secure a fair deal for members in a revised block exemption regime for the European automotive industry. The association’s chief executive, John Lewis, met Conservative MEP Malcolm Harbour in December and found him in agreement on a number of key areas. “He understood the need for leasing companies to have their end-user status protected and told us he was pushing for the European Parliament to be given more time to evaluate and provide feedback on the new proposals,” said Lewis. Harbour, who chairs the European Parliament’s Internal Market and
Consumer Protection committee, expressed interest in one of the key issues raised by last summer’s shortage of holiday rental cars. Said Lewis: “I told him about the problem that rental companies have in moving cars across EU member borders to meet seasonal peaks in demand. The correct functioning of the internal market is being hampered by the overzealous application of local registration laws and taxes.” After 30 years in the automotive industry, Harbour maintains a keen interest in the issues affecting it. He is currently pressing the European Commission to agree to a global standard on electronic stability control (ESC) technology, with a view to making it mandatory in Europe. n
Pre-Budget Report encourages electric vehicle buyers but ducks AMAP reform The government announced further support for early adopters of electric vehicles in the Pre-Budget Report, delivered on 9 December. Chancellor Alistair Darling announced that electric cars and vans would be exempted from benefit–in-kind tax for five years from April 2010. He also announced the introduction of a 100% first-year allowance for companies purchasing electric vans, enabling them to offset the cost of buying one of these vehicles against their corporation tax bill. The BVRLA will work with HM Treasury to ensure that leasing firms are able to claim these allowances. “We are really pleased that the Chancellor has listened to our call to modernise the business tax regime and give a clear, long-term incentive for companies willing to be early adopters of
News in brief Association answers OFT study
The BVRLA has submitted its response to the Office of Fair Trading (OFT) study into online ‘drip pricing’ – where consumers find that a series of extras add to the price while going through the purchasing process. The association has explained that its members’ pricing methods give customers a clear idea of the drive-away price when renting a vehicle. The full response can be found on the BVRLA website: www.bvrla.co.uk/Lobbying_and_ Campaigns/Consultation_Responses. aspx
Block exemption draft published The European Commission has published a draft of the new Motor Vehicle Block Exemption Regulation which it intends to introduce in May when the existing regulation expires. Comments on the draft can be submitted up to 10 February 2010. http://ec.europa.eu/competition/ consultations/2010_motor_vehicles/ index.html
electric cars and vans,” said BVRLA chief executive John Lewis. “Together with the £2,500 - £5,000 incentive the government is planning to introduce from 2011 for people buying ultra-low carbon cars, these new measures will help speed-up the mass-market adoption of sustainable road transport in Britain. We believe business users will be at the forefront, but all this depends on manufacturers swiftly coming to market with attractive, affordable, reliable and safe electric vehicles.” However, there was little good news for commercial vehicle operators as the Chancellor ignored pleas to help the freight transport industry by abandoning the rise in fuel duty due for April 2010 or introducing an ‘essential user’ rebate. With around 40% of the UK truck parc aged over eight years, the
BVRLA believes that the government should have introduced an incentive for operators to buy and lease more environmentally friendly Euro IV or Euro V vehicles. The BVRLA has also criticised the Chancellor for an inconsistent strategy in his attempts to reduce road use. “On the one hand the government is increasing fuel duty and fuel benefit charges in a bid to encourage people to consider greener motoring,” said Lewis. “But it has ignored our calls to change the structure of the Approved Mileage Allowance Payment (AMAP), so that the four million claimants are incentivised to use more fuel-efficient vehicles or alternative means of transport when undertaking business trips. This rate is too generous as it is and many organisations pay more, which actually encourages employees to drive extra miles to subsidise their wages.” n
BVRLA advises members to get to grips with Euro 5 technologies With new van models increasingly likely to meet the Euro 5 emission standard, which will become mandatory from 1 January 2011, the BVRLA is advising its members to get used to the technologies manufacturers are introducing to meet this new standard. Euro 5-compliant models introduced before 2011 will attract an annual discount from vehicle excise duty (VED) throughout their lifetime. Starting at £65, the discount will rise to £80 from April this year as the VED rate increases to £200 for most vans. To meet the standard, manufacturers are using exhaust gas recirculation (EGR) or selective catalytic reduction (SCR) technology, currently in use in some heavy goods vehicles. It is likely that SCR technology, which works by injecting a urea compound (marketed
as ‘AdBlue’) into exhaust gases after combustion, will only be used for larger vans. EGR, on the other hand, works by cooling exhaust gases and recirculating them around the engine for recombustion before passing through a diesel particulate filter. This technology is expected to be deployed in most smaller vans. The BVRLA believes that members who rent out vans using SCR technology should ensure that the AdBlue tank levels are sufficient, just as they would with washer fluid and water. With vans using EGR technology, members are advised to ensure that the filter doesn’t get blocked, which can happen when the vehicle is used only for short journeys. n See Euro 5 for Vans (fact sheet 580): www.bvrla.co.uk BVRLA News | January 2010
Electric cars: still a pricey alternative
Conference 2009: the DfT’s Graham Pendlebury addresses industry decision-makers
Brains and Brawn at conference More than 120 BVRLA members, senior industry figures and experts gathered at the Heritage Motor Centre in Gaydon, Warwickshire, last month for the first ever BVRLA Industry Conference. The event brought together delegates from across all areas of BVRLA membership for a day of fascinating presentations, challenging debate and high-quality networking. In the morning the audience was given a briefing on the state of the economy and the new and used vehicle markets by experts from the CBI, the Centre
for Automotive Industry Research and CAP. They were then treated to some customer insights from the fleet managers at the Environment Agency and retail group Arcadia. The event was rounded off with two high-profile speakers. Graham Pendlebury, the man in charge of the Department for Transport’s carbon reduction strategy, told members how they could contribute. Finally, Nick Fry, chief executive of the championshipwinning Brawn GP Formula One team, shared the inspirational story behind their fairytale first year on the grid. n
VAT place of supply rules change The VAT place of supply rules changed on 1 January 2010, reversing the position for deciding the country in which EU-based business customers should pay VAT on services. VAT will now be paid in the country where the customer is established, rather than the one in which the service supplier is based. Supplies to private individuals will follow this approach from 1 January 2013. The majority of car rentals will remain unaffected due to BVRLA lobbying, which ensured an exemption from the new rules for rental agreements that last 30 days or less. UK VAT will remain BVRLA News | January 2010
payable on these agreements at the point of rental, irrespective of the country in which the customer is established. Members will therefore need to consider how to treat rental agreements which last longer than 30 days or are extended beyond 30 days. The BVRLA has produced a fact sheet in conjunction with HM Revenue and Customs (HMRC) to help members ensure they are compliant with HMRC’s anti-avoidance measures which, for example, restrict the use of back-to back rental agreements. n See VAT Place of Supply Rules (fact sheet 579): www.bvrla.co.uk
Gordon Brown took delivery of an early Christmas present for the government car pool last month – a Mini E. It is one of 40 all-electric Minis being trialled over the next six months as part of a £25m government-backed scheme to test a range of electric vehicles. Alongside the trial, the Office for Low Emission Vehicles is grappling with the type and quality of the vehicles it plans to subsidise. Initially, it was calling for a high Euro NCAP rating and a seven-year warranty for the battery and three years for the other, more conventional, elements of the vehicle, but manufacturers are not supportive of this approach. They are calling for the vehicle to be type approved and have a commerciallyviable warranty. The BVRLA believes that few businesses mindful of the possibility of actions for negligence or corporate manslaughter would remove four-star Euro NCAP-rated vehicles from their fleets in favour of ones which simply have a type approval certificate. Equally, if the warranty is not sufficient, businesses will not take the risk involved with the new technology. There is also the cost to consider. Mitsubishi’s electric equivalent to its £9,500 i car, the i MiEV, currently costs £25,000. Similarly, a Citroën C1 costs £7,995 but its electric equivalent is £19,995. Fuel costs would be far lower, but it is doubtful that they would exceed this price difference during the vehicle’s probable lifespan as a leased vehicle. CAP believes it is unlikely that an electric vehicle would attract a premium residual value compared to a conventional equivalent vehicle. A mass market therefore appears to still be some years away. n
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Professional development Certificate in Fleet Consultancy Module One: 3-4 February Module Two: 30-31 March BEN: leasing and rental firms can help the charity with vehicle sales through auction houses
Used vehicles give a boost to BEN Leasing and rental firms have been signing up to raise money for automotive industry charity BEN – making a donation for every vehicle they sell through auction houses participating in a new scheme. Launched this month, the Fleet Disposal Contribution Plan is backed by BVRLA members Manheim and BCA – the auction houses are collecting pledges from vehicle vendors and passing the money to BEN. The charity believes the scheme could eventually raise millions of pounds. It comes at a time when BEN has seen a dramatic fall in income from vehicle manufacturers, most of whom donate
£1 for every new vehicle registered in the UK. “We are expanding and improving our range of care services continually and this money will go towards providing care and support to the 15,000 people who turn to us for help each year,” said BEN’s chief executive, David Main. David Brennan, the managing director of LeasePlan UK and chairman of the BVRLA’s Leasing and Fleet Management Committee, commented: “A small contribution for each car sold through the auctions will, collectively, provide a significant income stream for BEN and enable it to continue providing support for people in the industry.” n
Committee meetings 2010 Committee of Management
25 Feb 20 May (agm)
19 Aug
18 Nov
Chairman’s Committee
28 Jan
29 April
29 July
28 Oct
Commercial Vehicle Committee
11 Feb
19 May
7 Sept
30 Nov
Leasing & Fleet Management Committee 9 Mar
29 June
21 Sept
7 Dec
Leasing Broker Committee
23 Feb
22 June
19 Oct
2 Feb
27 April
6 July
21 April
20 July
23 Nov
Risk Management & Security Committee 10 Mar
9 June
16 Sept
SMR Forum Committee
14 July
25 Nov
Rental Committee RVR Forum Committee
24 Mar
5 Oct 9 Dec
Training programme 2010 Certificate in Fleet Consultancy Course
Amersham
3-4 Feb
Selling Contract Hire Course
Location tbc
9-10 Feb
SMR Forum
Location tbc
11 March
RVR Forum
Location tbc
17 March
Introduction to Fleet Course
Location tbc
14 April
For further information about all BVRLA courses, contact Clare Wilsdon: clare@bvrla.co.uk, 01494 545703
BVRLA News | January 2010
The BVRLA’s Certificate in Fleet Consultancy course provides training for senior sales and business development staff involved in direct sales to fleets. Delivered from a client’s perspective by the Institute of Car Fleet Management (ICFM). It is designed to provide delegates with new ideas and new methods of approach when selling to fleet managers and other stakeholders within a company. Kate Thompson, sales manager at BVRLA member JCT600, is a recent graduate of the programme. She shares her experiences with BVRLA News: What were your initial thoughts? “I have to be honest and say I was sceptical. I have 20 years’ experience in the industry and wondered what this course could teach me.” What did you learn? “It helped me re-evaluate my definition of contract hire and what constitutes fleet management. Today fleet management is about presenting a concept to clients rather than just a product. You are in a consultative role and the more information and knowledge you can bring to the discussions the more likely you are to win new business.” Any surprises? “I learnt a lot of things from the shared experiences of other course participants. The opportunity to mix with other sales people is one of its strongest attributes.” Have there been benefits for JCT600? “Yes, it has helped us to adopt a more uniform, structured approach to presenting our fleet management package to clients, enabling us to present a more professional image from the outset.” The course is accredited by the Institute of Leadership and Management. Attendance costs £1,275 plus VAT. Contact: Clare Wilsdon, clare@bvrla.co.uk 01494 545703 7