Fleet News

We're not sitting on £2bn of customers' money, say firms

CONTRACT hire companies have rejected a claim that they are sitting on £2 billion of customers' money in unspent maintenance payments. Fleet management specialist Fleet Cost Management made the allegation after breaking down a contract hire agreement to show that fleets pay the same maintenance fee per month, despite the fact that the actual maintenance bill is weighted towards the second half of the car's corporate life.

John Britcliffe, FCM's executive director of sales, said: 'If you take a snapshot of the contract after 18 months we estimate the contract hire company holds an average £248 ahead of actual expenditure.' The £2 billion figure comes from multiplying the 800,000 cars on contract hire in the UK by £248.

'It is just dead money as far as the customer is concerned, sitting in the bank accruing interest for the contract hire company,' said Britcliffe. He argued that contract hire companies should either adopt a pay-on-use strategy for their service and maintenance requirements, or that fleet management suppliers should weight their charges according to the age of the car, with minimal fees in the first year rising towards the end of the contract.

But contract hire companies already use discounted cash flow calculations to take into account the uneven maintenance expenditure during a car's fleet life, according to David Voss, chairman of the British Vehicle Rental and Leasing Association's leasing committee and managing director of VELO. Voss said it was unlikely for a fleet to seek residual value protection yet leave itself open to maintenance risk, and highlighted that customers can easily see what they are paying for maintenance due to Customs & Excise's insistence that contract hire agreements show how much a company is charging for maintenance.

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