Fleet News

'Dead money' claims slammed

BRITISH Vehicle Rental and Leasing Association chiefs have slammed claims that the contract hire industry is benefiting from the interest on £2 billion worth of clients' 'dead' money. BVRLA secretary general Norman Donkin said comments made recently by Fleet Cost Management executive director of sales John Britcliffe were 'arrant nonsense'.

Britcliffe said that with the majority of maintenance undertaken in the last third of the contract, leasing companies were benefiting from having more customers' money in the bank than they paid out for work. He said that after 18 months, the maintenance payments made under a typical contract were £248 ahead of the costs of work carried out. His comments were countered by leading industry chiefs - including David Voss at VELO and John Lewis at Dial - who pointed out that maintenance charges were transparent in the contract and the leasing companies were taking the risk.

Describing the allegations as a 'simple assertion', Donkin said: 'What appears to have been left out of the equation is the fact that contract hire companies work out the maintenance budget for each vehicle using discounted cash flow calculations. This means that the positive cash flow benefits in the early part are included in the calculation which therefore reduces the total cost to the customer. Contract hire companies compete very keenly, not only on service, but on price. Maintenance forms an important element in the structure of contract hire and its costs are strictly controlled.'

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