The Commercial vehicle retail sector is has been subject to a huge decline in volume over the last 2 years. Commercial vehicles were exempted from the scrappage scheme and as such have not enjoyed the boost that the car sector has over the last 6 months.
The decrease in volume of commercial vehicle sales has also been attributed to the lack of credit for SME’s in Ireland. Companies involved in the transport sector have been identified as high risk due to increased competition and reduced margins in their operations.
A feature of commercial vehicles used by businesses is the short life span of vehicles involved in haulage and logistics, this is down to the mileage they world cover on an annual basis. These vehicles would typically only be with an operator for between 24 and 36 months. So if they cannot buy, they still need trucks capable of doing the work.
The above points led us to conduct a survey of small companies who use our Truck Hire services. Out of a total of 127 respondents 66 cited lack of credit as a reason for renting a commercial vehicle. This works out at 52%. According to John Murphy, General Manager for Vanrentals.ie “ These results did not surprise me in the least, I would have liked to see the volume of bank approved commercial vehicle leases for the last 12 months, it would make for interesting reading”.
While the above sample result would seem to bode well for commercial vehicle contract hire providers, things are not really that simple. The contract hire companies themselves have joined the ranks of SME’s struggling to raise finance. Vehicle residuals have taken a hammering in the last 18 months and this has had the knock-on effect of depreciation tables being revised. The bottom line for the contract hire customer is a higher monthly invoice price to reflect this cost. Also, the vetting of contract hire customers has become more rigorous. In an effort to avoid bad debts and early contract termination, the nature of the customers business is being examined, especially financial health and history.
Without a change in the liquidity structure within the banks, the current situation for commercial vehicle procurement in Ireland will likely remain the same for the short to medium term, with some Distributorships reporting Hgv and Lgv registrations decliing by over 87%.