Fleet News

Fleet funding: Big firms are often the worst offenders

TIM Laver, director of finance and risk at leasing firm ALD Automotive, said good organisation was crucial to ensuring that companies stay on the right side of their suppliers.

He said: ‘The single biggest default reason without doubt is related to non-payment of the monthly lease.

‘However, apart from a company going bust, the next most common reason is invariably due to a cus-tomer’s internal administration and payment structure rather than the company’s poor financial health.’

Surprisingly, the defaulters are not always small companies with less developed business models. Often the larger, and hence more inflexible, firms are the ones that find themselves in trouble.

‘Small and medium-sized companies are usually happy to make their monthly lease payments by direct debit because it is beneficial in terms of their administration,’ Laver explained.

But larger companies do not favour direct debit. Although they have sophisticated financial IT systems the technology does not allow them to make payments without a purchase order and often without multiple authorisations being obtained.

‘Therefore, payments can often be delayed and, as a result, they could be deemed to be in breach of their lease agreements.’

However, should you find yourself defaulting on a payment, there’s no need to throw yourself upon your sword just yet.

Most suppliers will understand that mistakes are made and will try and find a way to rectify the problem.

Richard Taylor, head of sales at Siemens Motor Contracts, said: ‘It is inevitable that at some point a small minority of companies may default on leasing payments.

‘However, the vast majority of cases are fully resolved due in the main to a consistent two-way flow of communication. The last thing either party wants is for the asset in question to be repossessed.’

Laver added: ‘There is invariably a way around the problem.

‘The costs of terminating agreements in terms of legal and recovery costs are such that we would always want to work with our customers to help simplify their administration and payment processes.’

Fleet management consultant Bob Blackman, of Emmerson Hill Associates, said: ‘Other things which might jeopardise the contract might be arguments about botched or bodged repairs – usually DIY efforts by car users – which remain unseen until end-of-contract time.’

Failure to maintain cars properly is another contentious issue, Blackman said, such as costs of a blown engine caused by failing to heed warning signals or checking oil levels.

‘Another common problem is the lessee’s failure to exercise proper duty of care, usually by not having a proper car policy,’ he added.

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