Fleet Leasing

Manufacturers warned over leasing ‘discrimination’

Car manufacturers are being warned to ensure they comply with the law after instances were found when some provided different offers via leasing companies for the same product depending on the end-user of the vehicle.

The practice came to light when a customer discovered they would pay more on a lease as a private user than if they were supplied as a business for exactly the same vehicle.

The practice appears to be prohibited under the Supply of New Cars Order 2000, which states that car manufacturers cannot discriminate in terms of the discount for a new car with a contract hire company on the basis of whether the recipient of the vehicle is a fleet customer or not.

Rob Chisholm, managing director of leasing broker Applewood Vehicle Finance, said he has been trying to tackle individual manufacturers on this issue over a long period and, with one exception, has been met largely with resistance.

He told Fleet News: “The manufacturers like to protect their franchised dealers’ retail interest which, on one hand, is understandable because they have made a significant investment in that franchise, but should that really be to the detriment of the consumer?

“The problem emanates from the terms the manufacturer imposes on the leasing company rather than what the leasing company wishes to do.

“If it claims there are other issues at play, whether it’s to do with VAT or maintenance or exposure on residual values, this is nonsense because the lease deal is meant to reflect the true operating cost of a vehicle.”

Chisholm was interviewed for the BBC radio programme You and Yours over a disparity in the monthly lease rate for Volkswagen Golf R models, depending on whether the end-user was a retail customer or a business customer.

In the programme, Louise Wallis, head of business development at the National Franchised Dealers Association (NFDA), claimed the picture was more confused than suggested and there was a long history of different terms by dealers structured for whether the vehicle was supplied to consumers or business people.

But Chisholm said that after taking the matter up with Volkswagen UK last autumn, the manufacturer revised its procedures within days and now complies fully with the Order, but many other manufacturers still could be in breach of the law and seem unwilling to change their practices.

He is now urging any leasing suppliers who are coming up against the same issues to contact the Conduct and Markets Authority, which has said it would investigate any complaints.

“In fighting this I have received no support from within the industry – whether that be from the leasing companies, the manufacturers, contemporaries or the BVRLA,” said Chisholm.

“It is too hot a potato for them to handle or they are too scared to put their head above the parapet. The manufacturers feel that nobody will challenge them.”

The Society of Motor Manufacturers and Traders (SMMT) appears to agree with Chisholm and, after being approached by Fleet News, said in a statement: “SMMT takes its responsibilities under the Supply of New Cars Order very seriously. We will be reminding our members of their obligations.”

Gerry Keaney, BVRLA chief executive, said: “The BVRLA is not privy to the commercial terms agreed between its leasing members and their vehicle suppliers, but we support the SMMT’s initiative to remind its members of their obligations under the Supply of New Cars Order 2000.”
 



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Comments

  • Carcoat Damphands - 13/08/2014 11:02

    I have never heard of this and it has the potential to upset the industry.
    Just off to the supermarket to pick up a tin of worms and some popcorn.

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    • chizzy - 13/08/2014 11:17

      @Carcoat Damphands - I would suggest you ask the manufacturers about it ... and watch their uncomfortable shifting in seats. I can't tell you how many times this has occurred over the past 10+ years. Let's be clear though, that there are a number of manufacturers who abide by the relevant section of the Act to the letter - others don't, and I know exactly who they are, as do many others within the industry.

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    • Ralph Gobber - 18/08/2014 14:48

      @chizzy - The motor manufacturers need to be very scared as to how their own dealers and Leasing companies have conducted themselves over the last few years. VWFS have transacted many cases where private individuals have been proposed as self employed to overcome their pricing discrimination. This probably runs into thousands of customers being involved. This is just the tip of the iceberg. The manufacturers also pretend they do not offer Lease deals via the broker market only via their dealerships. They turn a blind eye to the fact that thousands of deals every week are proposed to their Leasing companies via their own dealers via brokers . A Leasing company is required by law to 'know your customer' . These people have no clue as to where their customers are being introduced from and whether the introducer is a valid business giving valid advice or if they even hold a consumer credit licence. You couldn't make it up could you ! It will be interesting to see what the FCA make of all this .

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  • Hilton Vehicle Leasing - 13/08/2014 17:03

    This is just the tip of the iceberg and is not just related to leasing v retail consumer pricing differences. There is a whole load of unfair disadvantages aimed not only at the private individual but also from manufacturer supply terms to smaller leasing companies.

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  • Tony Donnelly - 13/08/2014 18:35

    This is a case of winning the battle but losing the war. The manufacturer's own leasing companies can clearly be caught by this legislation as they are working to set criteria (RV, Maintenance etc) - the only variable being the price the dealer can get away with selling the car at.

    In the case of an independent leasing company - I don't believe the legislation stands up as RVs and Maintenance budgets will vary enormously. From experience I know that most dealer based finance offers will beat independent leasing organisations hands down.

    That's where the challenge of adding value plays its part.

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    • chizzy - 14/08/2014 15:24

      @Tony Donnelly - Tony, I can absolutely assure you or anyone else that the legislation does indeed stand up, and that introducing arguments about RV's and Maintenance clouds the issue. It is clearly demonstrable as to where the issue is. The manufacturers know this. The SMMT, BVRLA and RMIF know this too. They have done for a long time. The fact that they choose to try and ignore it doesn't mean it fails to exist.

      Your argument about dealer based offers can indeed be cheaper - however that is not a given by any stretch of the imagination. Unless of course you are referring to the subvented deals.

      If you are referring to fully maintained business use contracts then there are too many variables to make a straight comparison on price alone, which of course is why the major leasing companies independent of any manufacturer write the overwhelming majority of the business to SME's and large corporates, either directly or via the professional leasing broker market.

      Lastly, the manufacturers own leasing operations are the ones who can most easily hide away from the legislation. The fact that they are usually separate trading entities from the manufacturer can grey the issue, but it can be easily be got around.

      The main issue is how the manufacturers are dictating the Terms to the independent sector in breach of the Act and against the consumers interests.

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