Time flies when you’re having fun, and it’s certainly flown for us over the past three months with all of the changes we’ve been putting in place. We’ve checked in with our director Spencer Blake to see what these changes are and how the leasing industry as a whole has been during the last quarter.
Changes for Us
In the last quarter we’ve completely rebranded as a business which has been an Xciting new venture for us. This is something we’ve been working on in the background for nearly a year, and whilst it may seem crazy to launch against the challenging market at the minute, we felt it was important for us to stay fresh and relevant and the rebrand let us do this to bring a new Xperience to leasing customers.
Our rebrand isn’t just a case of a new logo and colour scheme. As a company our goal has always been to make leasing as easy and accessible as possible for all drivers, whether you’ve just passed your test, are looking for a better solution for your family, upgrading the company car or simply want a new set of wheels. Xcite gave us the opportunity to really focus on this, with a change in ethos that filters right through the team, from the Pricing Executives who find the best deals to the Leasing Consultants who’ll find the right car for you and the Support Team who help you with documents, delivery and beyond. We’ve changed all of our customer messaging on the website through to the texts and emails we send out during the leasing journey to reflect the excitement of getting a new car.
Another key part of the change for us was to make sure that our customers really understood the journey they were on and the different steps for them. We wanted to make it as appealing and undaunting as possible for drivers who are new to leasing as well as making giving returning customers the smoothest experience we could. This involved us taking out a lot of the jargony language and making sure all our communications were easy to understand. You’ll also see some content coming soon in our blogs and guides that breakdown the process to help drivers see where they are in the process and what the next steps will be which we think will be really useful.
We only rebranded a month ago and whilst there was a bit of an adjustment period we are already seeing a change within our teams and from our customers’ responses.
Changes in Leasing Over the Last Three Months
The retail sector, which covers personal and smaller business leasing continues to be pretty volatile. Our enquiry levels and orders placed are intrinsically linked to consumer confidence which continues to be affected by new relating to the cost of living, inflation and interest rates.
The UK’s wider economic situation is having the greatest impact on the market at the minute so any negative news seems to have an immediate impact on enquiry level. If a customer is already looking at a new lease deal, then negative news is more likely to mean they pause or even stop the process.
We have noticed however that if the price point on a lease is right, and it is perceived by the customer as representing value for money then there is demand in the market. This highlights the essential role that our pricing team has, as they speak to dealers and funders to get the best discounts on vehicles that we can and make sure that the website prices are accurate and affordable.
The price of many vehicles is significantly more than a couple of years ago and combined with the higher cost of lending and interest rates we’re seeing more expensive monthly rentals. This is the case for brokers and funders across the market and the industry as a whole is seeing higher rentals and the challenges they present.
For customers that are coming to the end of their current lease they are seeing either a significant increase in the monthly rentals for getting an updated version of their current car or are needing to downgrade to remain within the same price bracket. This has brought some challenges, but I think that our team is handling it well. Not only is the pricing team working to find great deals, but our Leasing Consultants are knowledgeable on all manufacturers and are able to help customers find a car that fits their pricing and comfort needs but might not have been on the customer’s radar.
In other areas of the business, we’ve seen a continued demand for fleet management and salary sacrifice throughout the quarter.
Affordability is Key
I’ve mentioned it before but the past quarter has shown that affordability has become a key part of the funder’s decision on whether they offer a lease or not. When considering affordability the funder looks at a variety of factors not just if you could make the monthly payments right now, but other financial commitments you have, expected changes to them and general economic changes (such as rising interest rates and increased cost of living).
Whereas a year or two ago most declines from funders were due to creditworthiness we’ve seen an increase in declines due to affordability as the wider economic changes have a bigger impact.
Changes in Consumer Behaviour
I think consumer behaviour is all about value, if the lease represents value then there is still the demand.
We are seeing a larger proportion of customers extending their current leases as they cannot replace it like for like without a significant increase to their monthly payments. We have a dedicated renewal specialist in the team, and they can help customers with extending their existing leases as well as helping customers find new leases. At the minute they are getting more requests for extensions rather than new leases but I think we’ll see that change in the next year as those who have previously extended reach the end of their agreement and our team’s ability to find the best deal for the individual will be key.
In the past quarter we’ve seen a shift from personal lease customers away from electric power trains and back towards petrol. Electric leasing has become more expensive over the quarter, mainly due to the volatility of EV residual values and this combined with a reduction in the cost of petrol at the pumps has made consumers consider whether now is the time to make the switch to electric. I expect the government announcement earlier this week pushing back the ban on new ICE powered cars will add to this and in the coming quarter we’ll see more drivers back in petrol cars.
One thing we have noticed with drivers still opting for EVs is that range anxiety is easing with the mileage ranges on new models improving with every car and the public charging network continuing to expant. Both Instavolt and Grid Serve have massive rollout programmes under way.
The focus on value means that customers are less concerned about a new car or what the finance product is, it’s about the cost per month and if that’s affordable. We’ve found that customers are prepared to compromise, with rising costs for mortgage / rent, energy, food and other essentials the car seems to be one area they have the flexibility on.
Changes in Car Stock Over the Last Quarter and into the Next
We’ve started to see the lead times coming down across manufacturers over the last quarter and pockets of stock have started to appear with some manufacturers.
One area where we’re still experiencing challenges with vehicle supply is with plug-in hybrids (PHEVs), as these have both the internal combustion engine (ICE) of a petrol or diesel car and the electric motors of an electric vehicle (EV) which means more parts, more complex and longer builds. We’re seeing some PHEV model lead times shift as part availability or build schedule timings change on top of the existing longer time it takes to create them. This can be difficult for us as we have to manage customer’s expectations, and disappointments at times, as well as keeping them mobile if there is a significant shift in the lead time for their new car. It also makes it harder for customers who are looking to make a more environmentally conscious choice but aren’t ready for a full EV just yet.
At the minute we’re really only seeing hybrid vehicles as factory orders, with many now pushed into early 2024 for expected delivery time. I hope that this will improve but realistically don’t expect us to see much change until the later part of next year.
For ICE powered cars and EVs long as current trends continue and there more available vehicles I expect in the next quarter we’ll see some manufacturers will improve the discounts they’re able to offer to sell the vehicles they have coming through. Additionally, in the next three months I expect there to be discounts and batch opportunities to appear for EVs as manufacturers will be looking to register any available electric stock to help them achieve their CAFÉ targets.
What Can We Expect for Leasing in the Coming Quarter
I think the next three months will continue to bring both opportunities and challenges. I expect the volatility to remain both in terms of pricing and enquiries but as ever there will be opportunities for us to construct competitive lease offers for our customers. I’m hoping for the wider economy to stabilise which will help build our consumer’s confidence. Stability will additionally lead to more settled pricing which in turn breads confidence. For the last 12 months pricing has been changing weekly as the residual values, cost of funds, vehicle basic list price and the available discount all fluctuate. All four of these factors are currently ever changing which makes staying on top of the market and finding value for a customer more challenging. We’ve developed tools to support our teams so that we can offer our customers the very best offers at any point and this month have taken on additional members in the pricing team to ensure that this is always up to date for our customers.
New car stock will continue to grow as the global supply chains recover, although we may see issues at the ports continue to cause delays between Europe and the UK but my hope is that these will reduce as processes become more established. I also see some opportunities for Xcite to secure batches of cars as dealers and manufacturers will be under pressure to register cars on the ground this year, especially EVs. We’ve already seen improved support on a number of models and I expect this to continue, with the help of our funding partners we feel that quarter four could really bring some Xciting offers to our customers.
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