Multi-bid fleet tendering delivers a better deal

Multi-bid fleet tendering delivers a better deal

Posted by

Martin Brown

July 2020

When it comes to sourcing fleet leasing, are you putting all your eggs in one basket?

I can understand if you are, because it’s convenient. There is ease of supply, a single point of contact and efficient communication lines. All of that I get. But would you put all your investments in one place just because it was more convenient?

I doubt it.

You would spread them around, reducing your exposure to risk.

So while I can understand the convenience factor of using just one leasing company for your fleet, it does leave you exposed to the risk of not getting the best deal.

There are various reasons why this is so.

Leasing companies have different levels of exposure and risk on vehicles, ranging from brands to particular models. So one leasing company might be highly competitive on a BMW lease, for example, but less so on a Mercedes-Benz rental.

And that’s simply because they want to take a balanced view of their underwriting book. They might be overexposed to Mercedes and under-represented by BMWs. And much of this is down to how they view the performance of residual values and the potential for profit at the end of the lease. Or the potential for loss, of course.

And a leasing company’s view on the residual value, and the rate of value loss, can also affect the contract rental rate, even if at four years both companies agree on the same residual. However, leasing company 1 may take a less benign view at 24 months leading to a difference in rental costs with leasing company 2 at that particular point in time – even if at four years they both agree on the same rental.

Finally, you are exposing yourself to the dreaded ‘rate creep’. So while the leasing company was bidding for your business, it was ultra-competitive to ensure it won your fleet, but over time this cost advantage is gradually eroded as more profit is put into each lease deal.

Which brings me neatly to multi-bid contract hire.

The benefits of multi-bid fleet tendering

There are many reasons why multi-bid fleet tendering is a rightly useful method for fleet acquisition, not to mention having access to multiple lines of credit.

You still have the one point of contact with a fleet management company – such as Fleet Alliance – but that company has a panel of funders that can put your contract hire requirements out to tender. We then select the best rental for the car you want at that particular time.

You would be surprised at the differences we see in lease rental quotations for the same car. The difference per month can be as much as £20-£50. So over a 3+ 36 month contract that’s almost £2000. Now multiply that by your fleet size – say 50 cars – and there is the potential to save £97,500 over a three year period. Which I would suggest is better belonging to your bottom line than balancing the risk books of a leasing company.

And the beauty of multi-bid is that we do it for every vehicle on your fleet when it comes to renewal time.

It means your business is always exposed to the best rental rates; and not to someone else’s risk profile.

It’s why you should opt for the one basket – but ensure your eggs are from the hens of different farms – and not just Farmer John’s.

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