During the height of the recession end-of-contract damage recharges from contract hire and leasing companies reached record levels.
Providers stood accused of taking a tougher line and charging companies for damage that could be considered ‘fair wear and tear’.
So what is the current situation – are leasing companies still taking a harsh line with damage recharges?
Ian Green, group car fleet manager, Peverel: Damage recharges are an issue that all fleet managers who contract hire will have to deal with at some point or another – unless they are lucky enough to employ drivers who look after their vehicles impeccably.
In the past I have considered the recharges a bit harsh but I have no complaints about the way challenges are handled at present.
The key is to agree a process that enables you to challenge items considered borderline or within the realms of fair wear and tear.
There will be times when leasing companies will need to be a little more vigilant than others in order to protect their planned income return.
Likewise, we will always seek to keep our costs to a minimum. It’s all about finding that mutually agreeable balance.
Tim Muir, planning and resource manager, ECG Facilities Services: This has been a big issue in the past. We have returned 106 vehicles this year and there was a potential damage recharge issue with every single one.
We adhere to the BVRLA’s fair wear and tear guidelines and we have every vehicle inspected and put through a bodyshop for repairs before it is returned.
From their initial position our old fleet provider has moved substantially to the point where we are now happy to accept a nominal charge per vehicle.
Phil Peace, director of sales, Hitachi Capital Vehicle Solutions: Historically, some companies have looked to damage recharges to recoup loss of revenue in end-of-life vehicles, but we aim to offer fair treatment to our customers.
We are open about what constitutes fair wear and tear and follow the BVRLA guidelines. We have always taken vehicle age and mileage into account.
Should fleet managers automatically challenge all damage recharges?
Ian Green: Don’t just take it as read that the invoices are right. Make sure that the images match the description and that the costs are proportionate to what is being described. If in doubt, ask the leasing company to review the recharge.
Tim Muir: Where justified fleet managers should absolutely challenge recharges.
Our contract refers to the BVRLA’s fair wear and tear guide but we have found that our interpretation of it and our provider’s interpretation can be worlds apart.
The vehicles being returned are, after all, engineers’ working vehicles, four years old and having done up to 100,000 miles, so they won’t be in pristine condition.
Phil Peace: Leasing companies should work proactively with fleet managers to make them fully understand the process of damage recharges, and the actions they can take to minimise them.
Should drivers have to pay damage recharges as standard? How do you put such a policy in place and enforce it?
Ian Green: We follow the BVRLA’s fair wear and tear guide and issue a copy to all of our company car drivers. If a driver doesn’t return a vehicle in good condition and the damage isn’t considered fair wear and tear we deduct the cost of the repair from their salary.
Tim Muir: If a driver is 100% liable for damage they pay a contribution to the repair but if they are genuinely not responsible then we will pay.
We give drivers a presentation on vehicle condition and make it clear that it is a company asset that they need to look after. We also have monthly inspection reports.
Phil Peace: There is a view in the industry that damage recharges should not be passed onto the driver. The rationale is that there should be incentives in place to ensure that drivers are acting responsibly for vehicles.
Drivers should be educated so they have repairs done immediately, instead of leaving them until the vehicle is returned.
In our experience policies that do allow for recharging a proportion of the damage recharge are badly policed or the policy is overridden at manager level to maintain a motivated workforce.
What can be done to minimise end-of-contract damage recharges in future?
Ian Green: I would advise fleet managers to take precautions in advance of the vehicles being returned to the contract hire provider by having a clear company car policy.
This means requesting that drivers report accidents at the time they happen and maintaining a business culture that cars are a valued asset and should be treated as such.
Driver training and regular vehicle checks could also address driver behaviour. Equally, enforcing a recharge policy should start to reduce the levels of damage when cars are returned.
Tim Muir: Driver education is important so that they return vehicles in reasonable condition but leasing companies also need to take a long hard look at the BVRLA guide.
Phil Peace: Customers could undertake a pre-return check to ensure that damage is identified and can be repaired prior to the vehicle’s return. It is also important to look at driver behaviour to highlight trends with specific drivers and eliminate unnecessary damage to vehicles.
The Fleet News view
Fleet managers should always challenge recharges that they believe fall outside the BVRLA guidelines but strategies also need to be in place to prevent or reduce future recharges such as giving drivers clear guidelines, carrying out regular inspections and timely repairs.