Lease accounting changes to increase financial transparency coupled with an ever-increasing corporate cost management focus is predicted to increase demand for pay-on-use maintenance.
That’s the view of Fleet Support Group (FSG) which is also forecasting a rise in demand for vehicles on finance lease and a switch away from contract hire/operating lease arrangements.
A major catalyst for change is the long-planned introduction of standard global accounting rules for the treatment of leased assets by companies. The revised regulations are expected to be introduced from January 1, 2015 and are likely to mean the finance elements of vehicle rentals having to be reported on balance sheets with maintenance and management fees logged in the profit and loss account.
Meanwhile, according to FSG Sales director Marcus Bray, customers are increasingly opting for pay-on-use maintenance - as an alternative to contract hire/operating lease inclusive of maintenance - and making significant financial savings.
The increasing reliability of vehicles, extended service intervals on many vehicles, fixed price servicing from most manufacturers and longer manufacturer warranties as well as robust internal fleet and risk management to ensure that company cars and vans are kept in good condition means that cost savings can be made, said Mr Bray.
“There really isn’t any justification for paying a risk premium for contract maintenance anymore when there is no longer any risk,” he said.
Calculations by FSG reveal that businesses can save hundreds of pounds per vehicle by opting for pay-on-use maintenance on a typical three-year/60,000-mile or four-year/80,000 mile contract compared against a basket of maintenance charges from leasing companies.
Mr Bray said: “There are massive cashflow advantages to opting for pay-on-use maintenance as well as the huge savings to be made by bringing the ‘risk’ back in house and fleet managing. It should also be remembered that when paying a monthly maintenance charge to leasing companies, fleets will also face additional charges for damaged items such as tyres, or other repairs where they are deemed to be driver influenced. This typically can add another 20% onto the contracted maintenance figure over the replacement term.”