Lease vehicles are likely to witness increasing mileage as fleet operators emerge from recession.

Analysis of data taken each year from FN50 companies following the start of the recession has shown average replacement cycles for cars take an erratic path as mileage of returned vehicles reduced dramatically in 2010, but has since risen steadily.

The average lifecycle of a car among FN50 companies has been even more difficult to predict, firstly increasing, but now at a lower level than in 2009.

However, figures for mileage recorded by companies in the FN50 survey are lower than those companies in the Fleet200 survey, while the average age of company cars going through the main remarketing channels is much older although mileage is typically lower.

Data in the FN50 survey of 2009 revealed a relatively sharp jump in the average time a leased car spent on a fleet, at 37.4 months from 36.9 months the previous year. Already this illustrates that the three years/60,000 miles figure that had been used as a benchmark for values was out of date with a number of fleet operators expecting their cars to work for much longer.

Much of the increase was put down to contract extensions as organisations running vehicles tried to guard against uncertainty over future prosperity, and for contract hire companies, when used car values had seen a marked decline, it made more sense to give the market time to recover.

At the same time, average mileage reduced when weighted to the length of the contract – indicative that fleet operators were perhaps also seeking to reduce the amount spent on fuel, prices of which had already begun to increase from its relative early-recession low point.

The full impact of the recession appeared to hit a year later, however, as fleets were still operating contract extensions although average mileage fell significantly, to below 60,000. It suggests that fleets were trying even harder to keep fuel costs under control, and perhaps avoiding using cars unless absolutely necessary. Average mileage fell by almost 4,000 on the previous year’s survey.

This decline has been a short-lived one as average mileage climbed by almost 1,300 the following year.

However, this increase came at the same time as shorter average contract length. In 2011 the average contract length was 36.8 months, compared with the previous year’s 37.6.

This is indicative on an emerging trend of vehicles being better utilised. If the recession had caused fleets to downsize as a result of staff being made redundant or other cost-cutting measures, the remaining vehicles were being used more effectively.

Advances in technology, especially software for fleet management and tracking, can help identify where vehicle utilisation can be improved, while more cars are now capable of tackling high mileage if properly maintained.

Away from the FN50, while vehicles spend a similar length of time on fleet, mileage is much higher.

The Fleet200, which surveys the largest 200 fleets in the country and where contract hire is more prevalent than outright purchase, average mileage for cars in 2012 stood at around 85,000.

Since 2001, most car warranties had reflected the then typical lifecycle of a new company car at three years/60,000 miles, but since 2002 we have seen a number of manufacturers offer longer cover.

Hyundai introduced a five-year/unlimited mileage warranty in 2002, and since then a number of other manufacturers have sought to offer customers longer cover, including Kia with seven years/100,000 miles and Toyota at five years/100,000 miles. These in particular offer some appeal to fleet operators and leasing companies, as they are transferrable to second owners, and can help make the vehicles seem a little more appealing at remarketing time if they have been used beyond three years/60,000 miles. While high-mileage might have traditionally been off-putting to used car buyers, and on no interest to the franchised dealer network, attitudes are softening toward them and defleeted cars whose manufacturer warranty is still valid can only have helped shift perceptions and given used buyers more confidence in certain older, higher mileage vehicles.

Although remarketing companies such as BCA and Manheim still suggest a 100,000-mile car going through auction would create little interest, the growth in longer warranties, as well as strong increases in fleet sales by Hyundai and Kia in recent years, would indicate the number of ex-company cars with manufacturer warranty left for second owners is increasing.

The main remarketing organisations have reported more marked increases in the average age and mileage of defleeted company cars.

BCA identified that the average age of fleet and lease cars began to increase in 2010, and it accelerated further in 2011. In that year BCA reported the average age of cars as 40.76 months, up from 39.75 months a year earlier, while average mileage rose more than 2,000, from 46,968 to 49,061.

Manheim has also reported increases in both age and mileage for its stock, with ex-company cars rising steeply in 2011, averaging 50 months and mileage increasing from 55,475 in 2009 to 57,848 in 2010 and reaching 59,368 in 2011.

Contract extensions during the early part of the recession resulted in the average age of defleeted vehicles rising. Many fleets reviewed their vehicle needs and chose either to run a longer contract when the extended vehicles were renewed or to revert to the original contract length.

One of the potential pitfalls of having long contracts for cars is that a user could be missing out on developments in technology that could help cut fuel use or provide a dramatic improvement in safety.

Funding vehicles by contract hire can have less dramatic cost implications for a fleet operator than outright purchase, as vehicles can be renewed at a lower financial cost even if the monthly rate turns out to be a little higher.

This would most likely encourage fleets to use a moderate contract length to allow them to switch to a newer, safer and more efficient vehicle at an earlier opportunity.

The future looks to be one of relative stability when it comes to contract length, with no major event on the horizon that would spark another spate of extensions. With the rising cost of fuel offset to a small extent by improvements in vehicle efficiency, the average mileage could continue to rise, but without the sharp increases identified across the industry in recent years.