Funding insight: Getting the terms and conditions right

Never sign up to the standard contract hire agreement. That’s the view of an experienced fleet manager who has used contract hire for more than 10 years.

“When you go through the standard contract you tend to find you have all the commitment,” he says.

“If you say, ‘no, I’m not going to sign up to that’ the contract hire provider is usually flexible.”

Although fleet managers that are responsible for thousands of vehicles will have the greatest bargaining power, small fleet operators shouldn’t be afraid to challenge the terms and conditions.

“If you’re in charge of a 25-plus fleet you can normally come up with your own specifications,” says Peter Bonney, fleet controller at the Salvation Army.

“You usually go through the master lease agreement, find the things you don’t like and have several pages of addendums tailored to your requirements.”

He points out that as you will be dealing with the leasing company for at least a few years it’s “worth spending time to get it right”.

It is also advisable to involve your legal department if your company has one.

Mike Belcher, head of sales at Hitachi Capital Vehicle Solutions, says: “I’ve witnessed well-meaning non-lawyers discussing with other non-lawyers clauses that are then inserted into the main body of an agreement.

"This can cause delays in the agreement of contracts when the protection that is needed already exists under English law.”

For fleet operators in the public sector, the hard work may already have been done for them.

They can take advantage of framework agreements set up by professional buying organisations, such as the Government Procurement Service (GPS).

NHS Blood and Transplant (NHSBT) uses GPS for its company car fleet but takes a different approach with its liveried fleet.

Larry Bannon, national fleet service manager, says: “We make sure the terms of contract fit our operation so that we’re not running vehicles longer than we need to or keeping vehicles for shorter periods than we need to.

“As we operate in a fairly certain sector, we know what our vehicles will be doing tomorrow.

“If you operate in an uncertain sector your contract needs to be flexible. If it’s too rigid you may end up paying a penalty.

“Make sure you have a contract that’s fit for purpose for your organisation.”

Graham Short, fleet and property operations manager at Evander Glazing and Locks, agrees: “Speak to your account manager to establish your specific needs.”

Consider how tightly you want to manage your contract hire provider. Andrew Kirby, regional and public sales director at Lex Autolease, says: “A good contract hire agreement must include a clear account management strategy and service level agreement (SLA).”