FN50 analysis: £90m bill for end of contract re-charges

7 November 2002

FLEETS that contract hire company cars are paying millions of pounds in unbudgeted end-of-lease re-charges for excess mileage and undue wear and tear, new research has revealed.

The findings were contained in this year's FN50, Fleet News' annual analysis of the UK's 50 largest contract hire and leasing companies.

The analysis exposed a £90 million black hole in fleet accounts caused by damage re-charges and excess mileage charges when vehicles are returned to contract hire firms. Overall, 32% of vehicles incur wear and tear re-charges of an average of £189 per car, while 36% of returned cars are over their contract mileage threshold and incur an average excess mileage charge of £435.

However, leasing companies revealed they imposed average wear and tear re-charges of £610 per vehicle, while excess mileage charges reached more than £1,000 per vehicle.

Extrapolated across the entire UK contract hire fleet, it appears that end of contract re-charges cost fleets at least £90 million a year. While charges such as these come as a nasty sting in the tail, they are not hidden costs. Excess mileage rates are established at the outset of a contract, while the vast majority of FN50 contract hire companies use the British Vehicle Rental & Leasing Association's fair wear and tear guide as a benchmark.

Yet fleets could avoid or minimise wear and tear re-charges by conducting basic checks on vehicles, introducing driver training, penalising careless drivers, and refurbishing vehicles before returning them. And pooling mileage, so that under mileage cars offset excess mileage cars, could significantly lower excess mileage fees. Many leasing companies are actively trying to help customers avoid charges, because of the potential for the end of contract sting to threaten good relations.

Jon Walden, managing director of Lex Vehicle Leasing, said: 'I would encourage fleet decision-makers to ensure their leasing company is being proactive about these charges.'

The findings also show the danger of fleets focusing solely on the monthly cost of a lease, Pendragon Contracts claimed.

Irene Emery, customer services manager, said: 'Many customers have been tempted to try relatively unknown contract hire companies that advertise low rates, but have had their fingers burned when the supplier hits them by clawing back excessive amounts in re-charges.'

This year's FN50 is the most comprehensive in the history of the survey, with reports on a vast range of issues affecting leasing customers and the industry.

Issues covered include the future of residual values, a major vehicle reliability survey, an in-depth guide to funding options, European leasing, future service developments, online products, flexible benefits and fuel choices.