Fleets urged to check and challenge damage charges

Companies are being urged to ‘check and challenge’ damage recharges amid concerns about widely differing standards and costs among leasing suppliers.

Although reputable leasing companies adhere to the strict guidelines for allowable damage set out in the British Vehicle Rental and Leasing Association’s Fair Wear and Tear Guide, industry charges beyond this point have been described as a “dark art”.

Key concerns include substantial variances in charges between leasing companies and even discrepancies between damage assessments at handover and the actual invoice being received.

Experts agree the most immediate priority for fleets is to target drivers to eliminate damage in the first place, but they recognise even the most careful fleet will have issues.

Challenge leasing firms to reduce charges

Damian James, chairman of the fleet operators’ association ACFO and head of operations at Bracknell Forest Council, leases 54 cars and commercial vehicles.

He keeps a record of returned vehicles, along with the condition inspection report at the time of collection and any subsequent charges from the contract hire company.

He said: “I automatically challenge the damage recharge cost versus the condition inspection report and in the past year I have saved 51% of the invoiced recharge cost as a result of my challenges. Vehicle damage recharges appear to be a dark art.

“My experience shows that if you challenge the leasing companies and have solid grounds on which to do so – the vehicle inspection report – the level of charges can be reduced.”

Negotiate charge waivers before agreeing contracts

Fleet management specialist Fleet Logistics, which oversees 120,000 vehicles across Europe, believes fleets need to tackle a lack of uniformity in charges when they first agree contracts with suppliers.

Stuart Donnelly, Fleet Logistics chief regional officer for Northern Europe, argues that outside the BVRLA’s fair wear and tear agreement, there is no mechanism for gauging whether leasing companies’ end-of-contract charges are justifiable or reasonable.

“Charges could be incurred for anything from a missing set of spare keys, an absent stamp in a service book, or the size of a scratch or dent,” he said.

“That is why it is so important for companies to check and challenge any charges that look unreasonable, excessive or inappropriate and negotiate with the leasing company.”

Fleet Logistics specialises in these negotiations and often negotiates a waiver during pre-contract negotiations, typically £300 for a car or £500-£1,000 for a van.

Leasing companies are working to avoid end-of-contract dispute where possible. Ogilvie Fleet won a customer service award at the annual FN50 last year for its work to minimise charges.

Its policy starts at the outset of a contract, when it agrees a standard charge for different types of damage, irrespective of the car or van involved.

The charges reflect the cost of returning a vehicle to BVRLA ‘fair wear and tear standards’. For cars, they are £75 for a door panel, front wings and rear quarter panels; £120 for a bonnet, boot lid, tailgate, bumper, roof or van sliding door (see panel, left).

How less stringent assessments can save money

Ogilvie Fleet operations director Jim Hannah said: “We want customers to have a pleasurable experience when they lease vehicles from us and not for it to be tainted by a battle over end-of-contract charges. This isn’t a profit centre for us.”

With a less stringent attitude towards assessing vehicle damage, the company estimates it saves hundreds of thousands of pounds a year on inspection costs, which can instead be used to support the low recharge scheme.

The firm is also helping fleets to encourage careful use of vehicles in the first place by sending a ‘thank you’ email if a vehicle is returned in good condition.

Jim McNally, chairman of the BVRLA’s residual value and remarketing committee, told the fleet industry recently that leasing companies don’t want to have end-of-contract charges, as they would rather set appropriate prices at the start of a contract.

Damage charges ‘the biggest cause of dispute’

He told last year’s annual ACFO conference: “If a fleet is going to use a vehicle in a quarry, then don’t tell us that it will be used on the motorway because we will build the price strategy against that usage. Talk to your leasing provider who will structure a rental that works for you and them.”

“De-hire damage is the biggest cause of dispute between leasing companies and their customers. Inspecting vehicles 10-12 weeks before end of contract means fleet managers have the opportunity to mitigate end-of-contract damage charges.”

National standard for damage ‘unworkable’

Any attempt to introduce a national standard for all vehicle damage would prove unworkable, according to industry experts.

After years of discussion, the sheer complexity of implementing a national standard and the widely varying opinions on what constitutes a ‘standard level’ have proved insurmountable obstacles.

Jonathan Higham, logistics director at auction giant BCA, says: “There are so many cost variables that producing a credible standard tariff for replacing car parts is unlikely to be achievable.

“There are well over 150 inspection types being delivered by a variety of organisations, each with a slightly differing approach. One supplier used by BCA has over 6.5 million prices in their catalogue just for replacement parts alone.”

The cost structure also depends on what the aim of the repair is, for example for wholesale remarketing, retail sale or covering loss against residual value.

Fleet Logistics’s Stuart Donnelly added: “All leasing companies are different and they continually strive to differentiate themselves from their competitors.

“We do not envisage them agreeing to a standard menu pricing for recharges for end of contract damage that the whole industry would abide by.”