Vehicle leasing giant Northgate is well placed to take advantage of the growing trend for operators to rent rather than to buy their vans.
The pattern to rent has emerged more strongly in the post-recession years as customers look to avoid the depreciation risks of purchase and contract hire and shy away from maintaining fleets of vans during quiet periods.
Northgate caters for everything from daily rental to long term deals but sales and marketing director Jon Tobbell says: “In pure numbers 95% is business to business.”
The firm has a 60,000-strong fleet (including 55,000 LCVS) operating from 71 UK branches stretching from “Aberdeen to Exeter and Norwich to Moseley” as Tobbell puts it.
The fleet includes 1400 utility Chapter 8 vans and high payload Lutons.
Northgate strengthened its grip on the sector at the tail end of 2010 when key competitors GE Capital and Leaseway withdrew from the market.
Tobbell says that it added 10 new sites to its network in each of the last two years.
Customer service is crucial to the success of the business, stresses Tobbell, and of prime importance is suitable vehicle replacement in the event of breakdown.
“It is critical to be close to someone who can fix the problem and take [the vehicle] to a branch,” he says, explaining Northgate uses the AA for vehicle recovery.
He claims Northgate replaces vans like-for-like, unlike a dealer, which might offer a courtesy car.
“Our vehicles are mission critical,” he insists. “We want a retail [level of] customer service, we must meet customer needs with 100% reliability.”
Northgate offers out of hours servicing from 6am to 10pm at 10 of its workshops, so that customers can drop off their vans at 5pm and collect them first thing the next morning ready for the working day.
Tobbell claims Northgate is two and a half times bigger than its nearest competitor and more than 600% bigger than the average vehicle rental firm.
But in terms of the brand name he says: “We are not as well known as we should be.”
To address this the firm has launched a radio advertising campaign and has also placed ads in the men’s toilets at motorway service stations, which drum home the message that “your van’s costing too much and we can save you money”.
He explains that prior to 2012 Northgate was a holding company owning other brands so its own name was little known. Therefore it has only had two to three years to raise awareness of its business as a national identity.
With its flexible rental model Tobbell says the most popular hire period is three months although some customers do take vans for as long as three years.
“Our model allows flexibility,” he says, “there is no contract, you are not tied down to a specific time and you can increase or decrease the number of vans so it’s good for seasonal contracts.”
Tobbell adds that the model also allows customers to switch between, for example, short or medium –wheelbase vans or vice versa as required, means they are not burdened with an under utilised fleet and are not exposed to the heavy depreciation they risk if they opt for outright purchase or contract hire.
“It’s no risk – if you suddenly lose work you’re not stuck with extra vans at, say 70% utilisation – you can give back the extra vans.”
Tobbell puts the question: “Businesses don’t buy their offices or their PCs now so why should they buy their vans?”
Leasing a van from Northgate, Tobbell argues, gives customers “clarity of investment” by providing a budgetable cost that includes maintenance within a weekly rent.
“Damage is the only unforeseen cost,” Tobbell explains, “all customers have their own insurance.”
If the customer decides to cover the cost of the repair rather than lose a no-claim bonus Northgate uses claims specialist Audatex to supply an estimate.
Tobbell is forthright in promoting the economic benefits that Northgate offers.
“We believe we’re cheaper on every occasion. We believe over the lifetime of the average van we will be cheaper.”
He explains that 40,000 of the firm’s vans carry the hirer’s livery with 20,000 – including most of those on short leases – bearing Northgate branding. He says customers can have whatever racking they want and adds that although this would more likely feature in long-term deals it also applies to three-month leases.
“It’s easier to de-rack a van than to sell it,” he claims.
Tobbell argues that Northgate’s “hassle-free” model enables its customers to concentrate on what they are good at: managing their own businesses.
“So they outsource their fleets to us, we service, tax and sort out breakdowns. It’s not what businesses are skilled to do.”
A third of Northgate’s business is with national companies such as Royal Mail, for whom it is the biggest supplier, according to Tobbell, and the rest is with regional operators ranging from one-man-bands to small fleets of up to 50 vans, four out of five of which run less than five vehicles.
He lists construction, facilities management and couriers as Northgate’s three main sources of business and at any given time Tobbell says Northgate will have 6000 customers covering its total fleet, ranging from East Anglian crop growers in the spring to grit spreaders in the winter.
Northgate buys 20,000 units a year to cover its operations in the UK and Ireland with vans spending an average of 24 months on the fleet.
At the end of their first lives the vehicles go to de-fleet centres for disposal with the best quality 30% channeled through Northgate’s self-owned Van Monster business, which has 11 UK sites.
Having been hit by the recession in 2008 Northgate sold off 25% of its fleet over five years to help pay off debts. It is now bouncing back and has set its sites on opening 20 more locations in the next two years.
“We need profitable growth, we won’t buy business,” says Tobbell and stresses that the key to success is customer satisfaction.
“We must have zero disruption to customers, service is the be all and end all.”
He does not lack ambition for the company going forward.
Of the 650,000 UK firms running LCVs, he says: “every single one should be a customer of ours.”
