The LCV Market: The growth opportunity continues
Dealers looking for a sales growth opportunity have only to look at the small and medium sized business (SME) sector and LCVs.
Gain a sale for a light commercial vehicle and the smart dealer places themselves into pole-position to supply that same business with at least one car. This double sale opportunity reflects the reality that most small business owners with a van will often also be running their own car.
The LCV opportunity for SMEs is not limited to new vehicles; the reality is that many small business owners with a keen eye on costs appreciate the value and attraction of a used vehicle and helping them recognise the potential of financing their purchase can be a great way of creating a long-term relationship.
The SME Market Growth Trend
The way people work today is changing fast and more people than ever are starting their own business enterprise. It is a shift in behaviour that creates challenges and opportunities for dealers. The challenges come with new start ventures, which can be harder, but far from impossible to finance; the opportunities with the aforementioned multi-sale and CRM benefits.
To put the growth of the SME market in context;
Between 2000 and 2018, the UK saw a 63% increase in the number of SME business with an additional 2.2m businesses created; most of these were solus operators1. Not all of these businesses required a van to operate, but it is indicative of a shift in employment that has invariably led to rising demand for the sector. Over recent years, the growth has tailed off, but as renewals and continuing demand for services such as home delivery increase, we can foresee sustained steady growth in the market.
The sales evidence of growth in new businesses on LCV sales is compelling. In the year to the end of March 2019, new LCV sales grew by almost 9%2.
From a business perspective there are a range of potential benefits that can apply. Customers can often finance a newer/better van in preference to buying one outright and there are some clear financial upsides, including:
- Enhanced and controlled cashflow from a low initial payment through to fixed monthly costs
- A proportion of the cost of financing, depending on the company’s tax position can be offset against tax
- Financing a Vehicle purchase via a specialist vehicle Finance Company provides the SME with a valuable alternative source of funding to their Bank
There can also be an opportunity to extend a finance agreement in some cases.
From a finance provider’s perspective, there are some important benefits to outline. The funding is generally secured on the vehicle itselfand for many of our SME customers, their van is invariably a critical business tool, so they are very motivated to keep up to date with their repayments.
Further Market Growth Forecast
If, on reading this, you think that you have already missed the opportunity, fear not. Research published at the start of 20193 forecast continuing growth in the UK LCV market attributed to expansion in online retailing.
Another reason for growth in LCV sales will be environmental changes. To date, limited choice and range anxiety have held back the take-up of EV vans to date. However, momentum is building and with the introduction of more ultra-low emissions zones across the UK, we will see more businesses embracing EV.
As well as the immediate appeal to dealers, there is a long-term attraction of linking up with growth businesses; today’s sale could be tomorrow’s small fleet.
Need Help Just Ask
If fleet funding or any part of the vehicle financing process fills you with concern, then let the experts at Mann Island Finance help. Support is UK-wide and our field-based team is in place to help in these very circumstances. So, don’t miss out on a growth opportunity – call us on 0370 600 6668.