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Recent Price Trend - Fleet Vehicle Leasing
During the three years to 2017, the price of fleet vehicle leasing has been rising at an estimated annualized rate of 1.1%. Prices have grown primarily as a result of recent demand growth.
During the past three years, demand for fleet vehicle leasing has been growing due to general economic recovery. For example, the number of businesses, including wholesalers, manufacturers, retailers and other businesses that require vehicles for operations has increased. Additionally, growth in total trade value indicates that more leased trucks have been required to transport goods. Investment by local and state governments, which are key buyers of fleet vehicle leasing services, has also contributed marginally to demand increases. Suppliers have responded to rising demand by increasing the monthly payments that buyers are required to make for the vehicles they lease.
Price growth is also due in part to increases in supplier depreciation costs. During the past three years, the price of new cars has been rising slowly, which they have passed to buyers in the form of higher lease prices. Finally, market share concentration has risen. In turn, top suppliers have been subject to less competitive pressure, allowing them to raise their prices without fear of losing business.
However, price increases have been mitigated somewhat by a decline in corporate profit. Corporate profit indicates the amount of capital that businesses have to spend on transportation costs, including fleet leasing. Because many industries have struggled to recover from the recession, budgets have contracted and reduced demand for vehicle leases in many cases. Thus, smaller suppliers have largely kept their prices competitive, preventing them from increasing prices at a faster rate.
Moreover, prices have exhibited low volatility, allowing buyers to accurately budget for future fleet vehicle leasing expenditures. Buyers benefit from steady pricing because it reduces the need to lock in rates through long-term leases, giving them greater flexibility in determining their optimal lease length.
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