Credit crisis squeezes lease operator

By Maria Slade

The effects of the credit crunch have now extended to the local vehicle leasing market, where one of the biggest New Zealand players says it won't be offering any new leases for the foreseeable future.

Custom Fleet, ultimately owned by giant US conglomerate General Electric, says its moratorium on new leasing in both New Zealand and Australia is short term. It will continue to service existing leases.

But it says the volatility of world credit markets means it can't say when things will return to normal.

Custom Fleet is a subsidiary of GE Commercial Finance, a sister company to GE Money which announced last week it was cutting jobs and pulling back from home lending and car finance on both sides of the Tasman.

GE Money said the moves were a result of the international credit crisis.

It relies heavily on the wholesale funding markets, where money is now scarce and increasingly expensive.

Emma Rugge-Price, GE Commercial Finance's Australian-based vice-president of marketing, said the Custom Fleet decision was driven by the same conditions.

The fleet manager for a company which leases 60 vehicles from Custom Fleet, who did not want to be identified, feared the ban would push up rates.

"It narrows our options and reduces competition."

However other leasing companies did not believe it would create a shortage of vehicles for lease. Charles Willmer, managing director of LeasePlan, said his company and the other two majors - Orix and Fleet Partners - could take up the slack.

Willmer said it was difficult times for everyone and LeasePlan had just set up new funding arrangements.

This included benefiting from a three-year ¬1.5 billion ($3.4 billion) credit facility from its half-owner, Volkswagen. "We don't normally borrow from our shareholder. What we're doing is making sure the lines we have in place are guaranteed and we'll be able to weather through this issue."

Orix general manager Chris Briggs said while his company also wasn't immune to the credit market difficulties, it was business as usual.

Motoring writer Peter Gill believed Custom Fleet's situation was unique.

"I think what we're looking at here is just one particular large player being GE-owned and American-owned and fairly close to the problems of the sub-prime mortgage market and everything else that took place over there."

Gill said other companies would continue to lease, albeit carefully.

Dean Sheed, general manager of Volkswagen in New Zealand which also leases, said customer demand had "softened", as had the whole automotive market.

However, while the domestic customers had put away their chequebook, corporates still needed cars.

"There are businesses out there that have to buy because their vehicles are leased and they're turning over, and they have a workforce [to support]."

* Large car leasing company Custom Fleet has stopped offering new leases.
* It says the move is due to the international credit crisis.
* It follows its fellow General Electric subsidiary, GE Money, which has stopped offering new home and car loans.

- NZ Herald

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