LARGE fleets running more than 1,000 vehicles could dramatically reduce their costs by moving away from contract hire, according to Zenith Vehicle Contracts.

In a peculiar move for a leasing company, Zenith argues that the UK's largest fleets have the critical mass to carry the risk of residual value downturns and maintenance expenditure, rather than pay an insurance-type premium to avoid these risks via contract hire.

The company says that contract hire includes a risk premium to protect the leasing firm, and as with all insurance, over a long period the premiums have to exceed the risk pay-outs to give the insurer a margin.

However, large fleets, with the cash flow to survive residual value downturns, could take on the risk themselves and avoid paying this premium, said Andrew Cope, managing director of Zenith.

He added that for budgeting purposes an owned fleet can adopt pessimistic forecasts for residual values, and thereby avoid unwelcome and unanticipated shortfalls.

To assist large fleets to take maintenance and residual risk, Zenith is launching a new service based on open book accounts, with each contract establishing its own degree of profit and risk share between Zenith and the client.

'We will be looking to sell different ideas to large companies who are craving high quality service and cost transparency,' said Cope.

Zenith has reported a 50% increase in the number of cars it manages to 7,900 units, and a 183% rise in pre-tax profits to £1.53 million on turnover up by 34.5% to £21.7 million, for the year to March 31, 2002.