PENALTY charges for handing back damaged and excess mileage vehicles to leasing companies cost firms an estimated £330 million in the past year.

The cost of not keeping contract hired vehicles in good condition and keeping to agreed mileages is revealed in this year’s FN50, the annual in-depth survey into the contract hire and leasing market.

As well as listing the 50 largest leasing firms in the country, the FN50 also includes detailed research on the costs leasing companies are forced to pass on to customers because of vehicle damage or not sticking to agreed contract mileages.

More than a third of cars (36%) returned to leasing companies incur penalities for exceeding their contracted mileage, at an average cost of £408 per car – equating to a total bill of £220 million a year.

The report says: ‘Excess mileage charges can be the bane of a fleet manager’s life if mileage is not predicted accurately at the start of a contract and tracked throughout the vehicle’s life.’

Some leasing firms report that 70% of returns incur excess mileage charges, with the highest charges reaching more than £1,000.

On top of this massive invoice is a further £110 million for fair wear and tear charges, although this figure is marginally down on last year’s record high of £114 million.

The FN50 reported: ‘There is a growing concern about larger one-off bills caused by drivers ignoring basic checks on vehicles or filling up with the wrong fuel.

‘With longer service intervals, modern cars can cover 30,000 miles without a visit to the garage so simple checks must be carried out regularly. Yet many drivers who cover thousands of miles a month on business shun basic checks, even when alerted by their car’s warning lights.’

Leasing companies in the FN50 reported a record number of cars being leased from them this year, with 1,449,147 vehicles registered.

Fleet News editor John Maslen said: ‘Fleets are still turning to leasing because they expect to predict costs accurately with set monthly bills.But this is a waste of time if companies cannot ensure their vehicles avoid excess mileage charges and that drivers do not damage their cars.’

The FN50 is free with this issue of Fleet News. To order extra copies, go to the ‘Supplements’ section of FNN.