Administration fees

What are they? There may be an admin fee when a driver receives a fine or to prepare the paperwork to take the
vehicle abroad. Leasing companies may also charge to amend the contract, such as mileage (see excess mileage charges).

What’s the cost? Admin fees can vary from £10 to £40.

What’s the alternative? Try to agree a flat rate or see if the fee can be waived, particularly if you are in a solus arrangement.

Damage charges

What are they? Leasing companies charge for damage on returned vehicles that is considered outside fair wear and tear. The charge is to cover the cost of repair or compensate for any loss of value at auction.

Members of the British Vehicle Rental and Leasing Association (BVRLA) should adhere to its guide on what vehicle damage is acceptable or not.

Damage charges can be controversial as some leasing companies have a stricter interpretation of the guide than others.

You may find that a leasing company that offers a cheap rental has high end-of-contract damage charges.

What’s the cost? There is no set standard on charges. The average charge per vehicle according to last year’s FN50 was £263.

How can you reduce damage charges? Leasing companies advise fleet managers to be honest about what the vehicle is being used for.

Jim McNally, asset risk manager at vehicle leasing and management company Alphabet and chairman of the BVRLA’s residual value and remarketing committee, says: “Leasing companies don’t want to have end-of-contract charges. We would rather price for vehicle usage appropriately at the outset.

“If a fleet is going to use a vehicle in a quarry then don’t tell us that it will be used on the motorway because we will build the price strategy against that usage.”

Make sure that drivers are aware of damage charges and give them a copy of the BVRLA guide. Get drivers to report damage as soon as it happens so you can arrange a repair.

Consider charging drivers for at-fault damage or incentivising them to look after vehicles (see www.fleetnews.co.uk/damagepolicies).

Inspecting the vehicles at least a month before they are returned will allow time for them to be smart repaired if the damage is minor.

Alternatively, you may find that the damage charge is less than the cost of repair, depending on the leasing company’s policy.

Another option is a damage waiver. For example, the leasing company might agree that you will not be charged for the first £150 of damage.

However, some fleet managers feel that the leasing company will “make the money up elsewhere”.

Don’t be afraid to challenge damage charges as fleet managers report getting the charge reduced or revoked in some instances.

What could you negotiate instead? It’s possible to agree a profit-sharing arrangement as an alternative to damage charges although leasing companies may be more inclined to offer this only to larger fleets.

NHS Blood and Transplant (NHSBT) has a profit sharing agreement with its leasing provider, based on CAP prices for the month of auction, plus a 5% uplift (which acts as a ‘cushion’ for the leasing company).

Anything that the leasing company achieves above that is split 50/50 between it and NHSBT. Anything that is below NHSBT pays in full because it is generally down to excessive wear and tear.

NHSBT still gets an independent assessor’s report and is able to compare what the profit sharing arrangement costs versus what would have been paid in damage charges.