PCP and PCH

Two months ago I wrote about the heart ruling the head in some fleet managers’ purchase decisions.

more recently,

I was pleased to read a quote from the EXA corporation (a company that builds software and studies vehicle aerodynamics): “We know from experience that truck operators do partly make their decision based on design and might not embrace a radical new look that moves too far away from the more traditional styling of established brands.”

In other words, any future moves to redesign road freight from the ground up won’t just leave British trailer manufacturers high and dry. The take-up rate from haulage companies will also be slow. I suppose this is also the reason aeroplanes still look how they did forty years ago. There is no sense of “build a better mousetrap and the world will beat a path to your door.” What businesses actually say is “but we like the way our old mousetraps look!” Ideally third parties wouldn’t see your mousetraps/delivery vehicles at all, but if it’s unavoidable, that’s when the branding opportunity can’t be overlooked.

And the more your vehicle represents your brand, the greater the problem. To take an implausible example, if a lorry shaped like a recumbent Katie Hopkins could save your company fifty thousand pounds in fuel costs, would you run it? Would your driver even climb in it? You might prefer to let the trailer part run out of fuel.

Perhaps road freight should follow the example of rail. Anonymise the journey. Rather than treat transport as an advertising opportunity, think of it instead as a moneysaving exercise. Unbranded, identical vehicles would take the subjectivity out of purchase and contract decisions.

A logistics freight company such as the ubiquitous Norbert Dentressangle offers this service to “the most successful companies in the world”. Meanwhile, the smallest of the small businesses may also turn down the opportunity to market themselves to bystanders and overtakers, if they are simply hiring a van for a one-off job.

Everyone in between, however, from the artisan falafel chef to Tesco, sees the side of a new truck as a blank advertising hoarding, a white space that needs filling in. And the moment you take that leap of imagination, the look of the whole vehicle – whether it appears aggressive or futuristic, or shoots black smoke from raised tailpipes, or blocks a thoroughfare as it tries a three-point-turn – sends associative messages back to the public.

You might remember a photo of a lorry with the “We Fit!” branding which had tried and failed to fit under a railway bridge in Edenbridge in South London a year or so ago. An unbranded truck wouldn’t have been ironic. No irony = no headline = no reputational hit! Perhaps the message from that is: if you’re going to pay a price for advertising, let it be a price you can control.

Our vehicle finance director Graham Hill wrote a piece in the Financial Times in March, writing about a couple of jargon-initials: PCP and GMFV (guaranteed minimum future value). To quote Graham’s example: “Environmental concern about diesel an increased congestion charges creates a risk that diesel car prices could drop through the floor. With PCP, if the value dropped after signing your deal, you could just hand the car back at the end and walk away.” Or if the true market value exceeds the GMFV, that money could go towards the cost of financing a future vehicle, or switching to the latest model for the same monthly payment.

Typically, drivers will pay a bit less on a personal contract hire (PCH) than on a PCP, because many contract hire rates have substantial discounts and bonuses built into the calculation. Yet they’re less likely to be signed up to a PCH in the first place because car dealers make more commission on PCP deals and the range of options presented at decision time tends to be vanishingly narrow.

The NACFB’s view, as you might expect, is that brokers should be involved to talk through the options. New car registrations remained broadly flat in February – only dropping 0.3% – which perhaps is more about private car owners waiting for the 17 plate than anything else. And even the numberplate is branding exercise. Who’s got the newest fleet? Whose vehicles are most demonstrably up to date? The goalposts are changing week by week – listen to the Mayor of London’s recent salvos fired against the diesel engine, and you can see how for the fleet manager, long-termism has become a game with complex rules.