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Bodyshops face courtesy car trouble

Courtesy cars are set to become an even greater cost burden to bodyshops as experts claim the current highly-competitive lease rates are not sustainable.

And those companies that have purchased their courtesy car fleet face massive losses from falling residual values.

Interleasing, the UK's third-biggest contract hirer, says pressure on residual values and the losses sustained by leasing companies in the last two years make rate increases inevitable.

Nick Brownrigg, managing director of GM-owned Interleasing, says: “The residual value recession has left many companies losing up to £1000 per contract on the residual alone. “Consider that the total profit on a contract might only be £500 and it's obvious the current situation can't continue.”

Historically, leasing companies often call for a rate rise, but pressure from market-share hungry competitors halt such ambitions. However, Brownrigg believes that there are few new competitors willing to enter the leasing market using aggressive rates to buy business.

“New entrants are fewer and more educated and they're not willing to risk all to earn more business,” he says. And worse may be to come. Brownrigg predicts that residual value pressures will build this year. Interleasing estimates that up to one million of last year's record 2.4m new cars were sold on “short cycle business” and are flooding the used market.

“This is extremely damaging to used vehicle prices,” says Brownrigg.

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