Common business sense means that contract hire and leasing companies do not want to make a loss on service, maintenance and repair (SMR) costs so it is vital that they undertake a robust risk assessment and measure and manage the lifecycle of individual vehicle components.
But, in the pursuit of contract wins in an ultra-competitive market, SMR is the poor relation in budgetary terms, it is claimed.
Stephen Dilley, managing director of Fleet Influence, said: “Leasing companies use SMR forecasting tools and they know what they should be forecasting, but when they go to the market to win a deal they will start to ignore what the tools are telling them.
“There are funding costs, the price of the vehicle and residual value, which is the Holy Grail, but SMR - despite the magnitude of the cost if clocking up reasonably high mileage - is the factor that is always trimmed.”
Typically SMR accounts for about up to 15% of a lease rate, but said Mr Dilley: “Fleets want an all-inclusive vehicle and maintenance package and no grief. If leasing companies only focus on the cost of supplying a vehicle, funding and rate of depreciation they are giving no consideration to customer service. While leasing companies may not view SMR as financially critical, it is by far the most operationally critical element to customers.
“If fleets have cars off the road that costs time and money and leasing companies will have unhappy customers.”
Experts also point to the adoption of transaction platforms, of which 1Link is the best known, as being a huge benefit to leasing companies, but also resulting in them reducing the size of maintenance control teams.
Dilley said: “Fleet Influence and our competitors supply a wealth of data, but leasing companies do not always have the teams of people in house to interpret that data and analyse it against what they are finding in the real world on their own fleet of vehicles.”
Epyx, the company behind 1Link, has developed ‘Price Check’, a model that provides real time management of labour rates, parts discounts, lubricant costs and overall job costs. A self-learning system, it assesses the costs related to specific SMR jobs and ensures there is no over pricing or upselling.
Mike Wise, director of tyre programmes at Epyx, said: “The age of the virtual leasing company is here. All data is far more transparent. The whole marketplace has changed in terms of manipulation of data as vehicles have become more reliable. The challenge for leasing companies is to differentiate themselves in terms of customer service and brand.
“Because of the arrival of all embracing standard servicing from vehicle manufacturers (such as Mini’s TLC servicing package), costs are much easier to check and manage.”
Meanwhile, Jason Fitzgerald, account director, UK Motor Innovation Motorconsult, which counts vehicle maintenance costing tool Maintbook among its product portfolio, believes there is a possibility that some smaller leasing companies in pursuit of a business opportunity are disregarding proper SMR cost risk assessment.
Instead they are hoping that windfalls from car and van sale values achieved compared with residual value forecasts will offset any SMR loss.