Fleet News

FN50 analysis: Fleets wasting £114m a year in unnecessary lease charges

BRITAIN'S fleets are paying out an estimated £114 million a year in unnecessary end-of-contract recharges to their leasing providers every year, exclusive research carried out by Fleet News for this year's FN50 has revealed.

The bill has increased by 26% since last year, when it was estimated fleets were paying out £90 million. The drain on company resources of such massive spending is enormous, averaging £312,000 a day, or £13,000 an hour. According to the research for the FN50, the annual listing of the UK's top 50 contract hire and leasing companies printed with this week's Fleet News, 37% of cars returned to leasing companies incur a fair wear and tear recharge, averaging £231.

However, the figures vary significantly between leasing companies, ranging from 8% of cars to 78% of cars and charges averaging from £51 to £600. But even if fleets effectively tackle the problem of damage, they still face an even bigger headache with excess mileage charges.

Most contract hire agreements set a mileage limit for the time the car is with the customer, such as three years and 60,000 miles.

If this is exceeded, excess mileage payments come into force to counter the reduced value of the vehicle on the used car market because of its higher-than-expected mileage. On average 32% of returned vehicles incur an excess mileage charge, which is an average of £453.

As with damage fees, the amounts vary significantly between companies, with up to 60% of vehicles incurring a charge, ranging from under £100 to more than £1,100 according to the survey.

Individual leasing firms admit charges of £2.5 million a year being sent to customers who have exceeded contract mileages.

Yet both fair wear and tear costs and excess mileage charges are costs fleets should not have to bear if drivers took better care of vehicles and contract lengths were written correctly in the first place.

And while fleet decision-makers are making efforts to curb the massive end-of-contract repair burden, leasing firms are taking some steps to help. For example, HSBC Vehicle Finance has said it would not recharge customers if damage repairs are below £400.

The firm also revealed it would abolish tyre damage charges for drivers who made unscheduled tyre replacements under maintenance contracts.

HSBC Vehicle Finance claims the move would add £1 a month to maintenance contracts, but could save businesses £41 every time a tyre was unexpectedly replaced.

Lloyds TSB autolease has revealed it is scrapping charges for tyre repairs and replacements. Its 'Fair Play on Tyres' initiative means the company will cover any costs incurred by a puncture or a kerbed tyre.

And Europe's largest fleet, Motability, expects to save its customers more than £1 million every year by scrapping charges for replacing damaged tyres. Charges will only be incurred where tyres are lost, stolen or vandalised.

  • Subscribe to Fleet News.
  • Get the news delivered to your desktop
  • Leave a comment for your chance to win £20 of John Lewis vouchers.

    Every issue of Fleet News the editor picks his favourite comment from the past two weeks – get involved for your chance to appear in print and win!

    Login to comment

    Comments

    No comments have been made yet.

    Compare costs of your company cars

    Looking to acquire new vehicles? Check how much they'll cost to run with our Car Running Cost calculator.

    What is your BIK car tax liability?

    The Fleet News car tax calculator lets you work out tax costs for both employer and employee