Why do businesses think rental is short term?

For many years, the belief has existed among businesses that vehicle rental is a short-term proposition; something to temporarily plug the gaps.

The truth is that this model is becoming increasingly archaic, as new, flexible, longer-term solutions are introduced that help to boost mobility while reducing the headache associated with contract hire or purchase.

Of course, different businesses have different ways of acquiring their essential fleet, and some are understandably wary about committing to a longer-term rental arrangement.

Common misconception

The likes of fleet managers would perhaps acquire the majority of their vehicles through purchase, lease or contract hire, and not consider rental as a long-term solution. This means rental is often used within fleets as a short term solution initially, with fleet managers coming to realise that flexible vehicle hire is a perfect way to acquire a fleet once they have begun to reap the benefits.

Often when speaking to a fleet manager of an SME, the individual is not even aware of flexible vehicle hire during the initial conversation, and this is another common obstacle – raising awareness of the model and its multitude of benefits.

National companies, on the other hand, have a different perception – larger businesses very much view it as a longer term solution, as they have an understanding around the no commitment and flexibility parts of the rental package, which many misinterpret.

Case study

One of our biggest clients is based in the pharmaceutical and healthcare sector. Our partnership was initially based mainly on short-term rentals which the company used in order to transport drugs and other products to and from its many stores and warehouses, and deliver essential medicines across many general practitioners and care homes across the UK.

As our relationship with this customer developed, Northgate spoke to the organisation about developing the agreement and augmenting its fleet management and acquisition strategy to a longer term, flexible arrangement which would prove more cost effective for the business.

A tender process was required, but in doing so Northgate helped the business to move from a model where 80 per cent of its fleet was on short-term hire, to a longer term approach with flexibility and no contract that provided multiple benefits.

Having an open partnership with your vehicle supplier in this way enables a more strategic approach.

Northgate’s services are split between different parts of the company, with one arm employing a strategy to purchase outright through VW and then topping up the fleet with 150 Northgate vehicles on flexible terms.

The other arm of the business has 1,000 vehicles, 600 of which are rented through Northgate, meaning the bulk of the fleet is on flexible rental. The remainder of the fleet is purchased through Renault, but there would be significant benefits in expanding the flexible, longer-term approach to the entire fleet.

Manifold benefits

The greatest value in employing a long term rental model is having all assets managed; as Northgate takes care of servicing, maintenance and repair, keeps vehicles on the road for longer through a partnership with the AA, while the flexibility to adjust the fleet without penalty reduces downtime and saves money, making it ideal for a long-term approach.

With costs of maintenance, road tax, MOTs, road fund licence and much more being taken out of the client’s hands, effectively the whole life cost of the fleet is reduced, delivering both cost and time savings.

In an industry like healthcare and pharmaceuticals, where downtime can result in spoiled products and create supply chain problems, it is vital to have solid and sustained fleet performance.

The partnership with the pharmaceutical client is evidence that it is possible to change the perception of vehicle rental as short-term, and illustrate the many benefits that can be had from switching to a flexible, long-term model – something that is applicable to businesses of all sizes in every sector.

Post by Natasha Fry, National Business Development Manager at Northgate