Sep 30, 2014

Falling residual values

The challenging landscape of residual values

Announcements on tens of million write-offs by the leading car leasing companies are nearly day to day articles in the international fleet press. You could think that because of the leasing product you have chosen, it does not at all affect your bottom line. We would challenge you on that thought and encourage you to think again.

Some pressure already builds up on the encouragement from the leasing companies to extend vehicle contracts (or not to accept new orders). As residual values need to be reset for the adjusted duration and total mileage of these adjusted contracts, some market compensation might be slipping in. Also, for each new vehicle, residual values will be no where near the vehicle it replaces.

So, in maximum 4 years from now, the current market conditions are fully reflected in your cost base, off balance financing or not.

FleetVision will help you with contract reviews, price level agreements, contract extension reviews to help you understand your true exposure to residual values.