Is Leasing Vehicle Tracking A Thing Of The Past?

There are growing rumours in the tracking industry that the way vehicle tracking sales are financed could be set to change. For years the most popular way of buying a tracking system has been using business leasing and with no upfront payments and low monthly costs it is easy to see why. However what looked like a lucrative market for the lenders has quickly turned in to a headache with many underwriters having already pulled out of the market.

So what is the problem, why are lenders shying away from such a successful sector? As with most markets the lending criteria before the credit crunch was probably too easy, some customers have defaulted on payments but this has been no higher in the tracking sector than it has for new car sales. The key issue with the tracking market is not the customers defaulting it is the suppliers failing, because without them their tracking systems don’t work, leaving the customer with a worthless system and an outstanding lease which they do not want to pay.

The majority of costs associated with tracking a vehicle are for software licenses and data, both of which have no value to the lease company and cannot be re-sold. Lease underwriters have tried to address this by insisting that they will only finance the hardware costs, the actual black box that goes in to the vehicle to report its position. Lease providers however feel that the costs of hardware are being over inflated by some companies in order to achieve a bigger initial payouts from the finance company, further exposing them to risk.

Around the start of 2010 several big lease underwriters including ING decided they would only deal with a select few tracking companies. TrackCompare have however learnt that this could soon change again with the major underwriters pulling out of the market all together. So where will this leave the tracking sector?

Many companies have already put in place their own monthly payment schemes such as Pay As You Go however this does require an upfront payment and is in most cases more expensive than a lease. TrackCompare understands that some vehicle tracking providers already have plans in place to underwrite their own credit deals but for smaller companies this may not be an option. For these companies specialist ‘high risk’ brokers may be the only option but this could mean higher interest costs to customers and further pressure on profit margins for the supplier.