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When my son changed his phone to enable him to gain access to the Internet he had the choice of two phones at the time (going back a few years). The first was considered a bit of a toy and was an iPhone. The other was a Blackberry. He asked lots of questions and did his own research. The iPhone certainly seemed popular and it had some clever apps on it but the Blackberry was considered to the businessman’s version. Totally confused we went to one of the shops and after being given all the reasons why he should choose each phone by a very enthusiastic salesman he was still as confused until he saw one of the staff members answer his phone, it was a Blackberry.

He said to his salesman, who clearly knew all about the phones he was selling, ‘What phone do you have?’ he also pulled out a Blackberry. My son asked him why he chose the phone, was it given to him by the manufacturer or his employer? He said that it wasn’t but they could have any phone in the shop.

We walked out with a Blackberry. You see when we believe that someone is an expert we are happy to take his advice. Unfortunately the same doesn’t seem to apply to cars.

Whilst car salesmen are expert at getting you to part with your money they aren’t particularly expert in the various forms of finance so it’s easy to end up with a type of car finance that you have always used, as you know no different, or a scheme that is being promoted by the manufacturer/dealership.

The alternative is to listen to family members, work colleagues, friends etc. who are all experts of course. The alternative (other than taking my advice) is to see what companies are doing. The people that are paid to investigate the alternatives and make a decision on behalf of the company that pays their wages.

What are they doing? Well, I have to report that they have moved significantly from outright purchase to contract hire. In the last quarter of 2009 38% used outright purchase to fund their vehicles. When I say outright purchase this could be financed out of cash flow, overdraft and business loans.

The percent using leasing (contract hire) was higher, but only just at 42%. In the first quarter of 2011 this had moved significantly. Contract hire had moved up to a massive 66% whilst outright purchase has dropped to a meagre 17%. These results were obtained by GE in a recent survey carried out amongst companies.

I should add that the figures are a little skewed because fleets often use more than one finance method but clearly more fleet owners are moving into contract hire who hadn’t previously used it. Personally I have predicted that not only will this trend become more significant amongst business drivers but also consumers.

Last year I spoke on the subject and whilst contract hire is a fairly old product I announced it as a brand new product! What is the definition of ‘new’? It’s something you didn’t know existed before. So for most drivers contract hire is a new product. And it is clearly of benefit or businesses wouldn’t be using it.

Fleet services commercial director at GE, Gary Killeen, explained ‘Cars and vans can be acquired with minimum upfront outlay, monthly expenditure is fixed and determined in advance and the potential burden of residual value risk (how much you sell the car for) is removed.’

The points I have been making for years but finally I think some smaller businesses and consumers are starting to get the message. Long may it continue. Do you have any experiences or observations you would like to share? By Graham Hill