Time for change
The lifespan of a lease car in corporate fleets is relatively short. The majority of the cars that will arrive in fleets this year will find themselves in the remarking yards in four short years. By 2020 leasing companies will be looking to get the best possible price for what's a bright, shiny and new car today. With so much of a leasing company's profit margin riding on realising good residual values, the significance cannot be understated. We know all too well what happens if companies get it wrong.
Residual values play a huge part in determining the leasing rates that corporate customers' pay today. As fleet managers we all have on eye on the future, so we can be ready to respond to anything that influences a vehicles value. No-one likes to be on the back foot; especially when what we're talking about is cold hard cash.
That's why the fleet community needs to think about the impacts of autonomous technology today. Why? Well let me give you three reasons.
Firstly, remember the lifetime of a lease car is relatively short. Three, four, or maybe five years. Technology moves at lightening pace. What is new today is old almost before it is out. The car is catching up with tech that's already here quick smart. Once a mechanical feat of engineering, the car has gone digital.
Make no mistake. Cars are computers. And they're doing what other computers tell them to do. OEMs and tech leaders, like Google and Apple, tell us that in 2020 autonomous tech will be on the roads. Not only will this lead to huge changes in the automotive industry, but everything that makes motoring happen. From infrastructure through to insurance, the business models are about to be turned upside.
As a result the existing TCO model we know and love will be thrown out of the window. We will no longer be dealing with the car as we know it. Vehicle performance, employee productivity, safety and green will all come under the microscope, and new dangers like cyber-security and employee privacy will surface.
These are issues that you, as fleet managers, might have to start dealing with in just four years time. That's not a long time, is it?
Secondly, the new cars in your fleet today could be very old technology by 2020. What do you think that means for their residual values? No-one wants old technology, do they? Retro is in vogue, but four, five or six years old, isn't retro. I'd be amazed if leasing company CEOs aren't starting to get nervous about the risks of carrying old technology as assets. And for you dear fleet manager, managing that risks means higher lease rates today.
My final reason for writing about this really important issue is preparation and planning. What fleet managers buy today is starting to look very different from what was purchased in the past. And, what we are going to be buying tomorrow, will look radically different too. As a community we need to prepare for the future, and plan how we are going to evolve.
If we don't start talking about these issues it could be disastrous. Fortunately for you, there will be a dedicated session on this very topic during the Global Fleet Conference 2016 in Brussels, 6 to 8 June. If you needed another reason to sign up, this is a pretty good one, no?