Lowest rental rate is not always best-value option

Nationwide giant or local niche operator? Fleets have a multitude of options when it comes to choosing their leasing provider.

However, ensuring an organisation achieves the best value for money does not mean choosing the lowest rental rate.

There is a whole host of additional charges that need to be taken into consideration where contract hire companies can recover money lost by offering what appears on paper to be a very low leasing rate.

In addition, low quotes at the start of a contract can start to creep up midway through – tight controls are essential.

Chris Chandler, principal consultant at Lex Autolease, says: “The pursuit of the cheapest rental is a practice that should be consigned to the history books.

“Often you get what you pay for and, if it is the cheapest rental rate, you may be missing out on cost-saving benefits that are only realised on a fleet-wide basis.”

Phil Peace, director of sales at Hitachi Capital Vehicle Solutions, adds: “It is important to understand a full cost breakdown, and be careful not to base the decision on the lease rental price.

"Rather, it is vital to establish key elements behind the contract and learn how the leasing company will sustain pricing.”

Excess mileage pooling arrangements, a set number of early terminations a year without charge and limited risk on dilapidation charges all need to be discussed and agreed.

Profit share on residual value performance or maintenance spend against budget also offer cost-saving opportunities.

“A cheap rental could contain a nasty sting in the tail at the end of the contract,” adds Chandler.

Dave Bamber, fleet manager at Fleet News award-winning The Independent Group, says: “The most effective way to avoid end-of-term nightmares is to set up the agreement correctly in the first place as well as having policies in place during the vehicle lifetime to avoid damage.”

Mitch Elliott, fleet services manager at Procurement Lincolnshire, adds: “It’s vital that all leasing proposals clearly identify all costs, particularly end-of-life charges.

“It’s also important to establish if a particular operation will result in justified wear and tear that is beyond industry guidelines and agree for those to be built into the rental.”

However, excessive wear and tear is often down to the driver, so fleets could consider charging all or some of any penalties to drivers.

End of contract inspections are vital to ensure cars are returned in a clean and tidy condition.

“A visit to the smart repairer and a valet can pay dividends,” adds Pertemps’ fleet manager Adrian Harris.

Should fleets look to maximise their spending power via a solus deal or benchmark on prices by having a multi-supply arrangement with a number of leasing providers?

“A sole-supply deal offers the customer the potential for consistent pricing; a sustainable long-term partnership; good understanding of company and driver needs; lower administration and freedom from the need to decide between suppliers on every order,” says Paul Hollick, sales and marketing director at Alphabet.