Recent developments in the global economy have witnessed the near-extinction of some businesses and industries, while others have experienced tremendous growth.
Aside from sector-specific differences, what often separates the growth rate between thriving and dying businesses is their ability to move quickly and anticipate change. Global uncertainty and supply chain disruption means that rapidly adapting your logistics — including vehicle fleet expansion — could give your business the edge it needs to meet demand.
Below, we will take a deeper dive into the global supply chain landscape before considering how vehicle fleet expansion can help a business get ahead of its competitors.
1. Automotive Finance
Many small and medium-sized businesses eager to expand do not have enough liquidity to invest in a new fleet of vehicles by themselves. Fortunately for them, an entire industry in global automotive finance has rapidly expanded in recent years to meet this growing demand.
Many businesses are already taking advantage, rapidly building up their capacity to forge new client relationships and grow sales volumes. According to the Finance and Leasing Association, new car finance is set to grow by 14% in 2022.
Many automotive finance suppliers offer considerable flexibility to businesses in their finance packages, which has been welcome for smaller businesses, many of whom may be dipping their toes into business finance for the first time. For example, financing can be offered up to 100% of the purchase value, with a range of options on lending periods. Comparison sites are also available to help businesses find a competitive solution that works for them.
Automotive finance is available for all kinds of different vehicle types, including haulage, logistics, transport, trade, and construction, to suit the particular needs of each business.
Remember, you should always talk to an expert before you sign any finance agreements. Expert advice may also be helpful to determine what financing arrangements are available to you and to help you better understand your business’s risk profile.
2. A Changing Global Supply Chain Landscape
Recent months have transformed the operation and behavior of the global supply chain landscape in ways that have put pressure on businesses to expand their vehicle fleets.
First, there has been an acceleration in the shift towards online retail from high street shopping, prompted by shop closures, an aversion to physical shopping, and many businesses investing in their online offerings. According to research, online retail sales have grown by 15-30% in almost every retail category.
The consequence of this trend is a reworking of logistics patterns to adjust for home delivery. The volume of large-scale, just-in-time deliveries has been reduced in favor of a more diffuse, nimbler delivery model with a larger fleet of small vehicles, ranging from small-capacity trucks right down to delivery mopeds.
Also, constraints in global supply chains have prompted businesses to reconsider their model for sourcing goods and products. They’re abandoning overseas suppliers in favor of suppliers closer to home to escape the threat of supply chain disruption.
The result? Many domestic suppliers have been overwhelmed by a sudden boost in demand and lack the human resources and the technology to keep up.
3. Purchase Agreements
Hire purchase is another option for fleet expansion when an outright purchase is not possible.
In a hire purchase agreement, following an initial deposit, businesses contribute towards the cost of the value in monthly installments. Once all of the installments have been paid, a final payment to complete outright ownership is usually available.
One advantage of a hire purchase agreement is that some contracts allow hire purchases to be terminated early without a penalty. This means you can adapt your fleet to a greater or smaller capacity to meet market conditions without being exposed to the overall costs of the vehicle.
However, rates of interest on hire purchase contracts may be higher than with traditional automotive finance. In addition, since ownership is not transferred until after the final payment, your business could end up being exposed to a negative equity position if it is unable to meet the terms of the contract before the end of the term.
Fleet expansion is a key way your business can stay ahead of the curve in a fast-changing market. They can act as a valuable springboard to turn a small or medium-sized company into a much larger enterprise.
However, you have to expand your fleet the right way, and the process takes time and patience. Automotive finance and hire purchase agreements could help you expand your fleet much faster and more affordably. We recommend speaking to an expert about your business to determine the best way to grow your business.