Sale & leaseback comes into its own as recession bites

Many businesses are turning to sale & leaseback for their business cars as credit dries up. But what is sale & leaseback? And why would it help your company now? Business Car Manager motor finance expert, Brian Rogerson, reports. The sum of money now owed to small- and medium-sized enterprises (SMEs) stands at an incredible L25.9bn according to BACS Payment Schemes.

Overdue payments have risen by some 40% over the last 12 months. And while the Midlands has been hardest hit, the average SME is owed L38,000 in overdue invoices.

Given that, it’s hardly surprising that sale & leaseback is enjoying a boom. Small businesses are seeking to boost their cash position by turning their existing cars and light commercial vehicles into liquidity. Especially since many small businesses are also affected by reduced borrowing facilities from their banks.

Sale & leaseback deals on 1 to 75 business cars
Lombard Vehicle Management (Lombard) says its volume of sale & leaseback deals grew by 50% in 2008 as its customers increasingly sought a method of funding to release the cash value of their wheeled assets. Lombard says it has successfully negotiated sale & leaseback deals covering vehicle numbers from one unit to 75 over the last year.

Another major finance company, Lloyds TSB Autolease, has reported a “two-fold surge in businesses looking to improve cash flow from sale & leaseback agreements”. It purchased some L10m worth of company-owned cars in the last two months of 2008 and provided its small-business customers with “a valuable cash injection”.

Business director: more control over company cars
One small business director, who has already laid off two staff out of a total of seven, told Business Car Manager that, apart from the obvious cash-flow “lifeline” benefit, moving to a sale-and-leaseback arrangement with a finance company has led to more control over the company cars – especially as a maintenance clause was added to the contract.

He explained: “As control of the vehicles was effectively handed over to the finance company, budgeting has been made simpler and valuable staff time, which was effectively wasted on managing the running of the company cars, has been freed up to concentrate on the company’s core activities.”

As small businesses face up to the rigours of the recession, many consider having their scarce resources tied up in company cars no longer a good strategy.