Charge now, repair later policies called into question

Trading Standards’ ongoing investigation into Europcar has brought the issue of vehicle rental damage and pro-forma invoicing for fleets into focus.

While Europcar has said it is taking the investigation “very seriously and is conducting a thorough internal investigation”, it has refused to comment further on what prompted the visit by Trading Standards.

Reports suggest there is an issue around how Europcar charges customers for repairs and, according to its first half financial results, the vehicle rental company has set aside some €44 million (£40m) fearing possible litigation. 

Hire companies that use pro-forma invoicing issue a document that states the terms and conditions of the hire. Although an informal request for payment, it ensures any damage to a vehicle can be invoiced before the repair is carried out, which helps the rental company to better manage its cashflow, particularly in relation to the payment of VAT upon raising a full invoice.

Paul Tate, Siemens commodity manager, told Fleet News: “It’s possible the investigation will bring a spotlight back to this rental damage issue, which has always been a hot topic for fleets. I don’t think pro-forma invoicing has been challenged in a court of law, I think it’s right that the topic is discussed. Rental companies are using this to sell additional services, too, like damage waivers and zero excess.”

Siemens moved away from pro-forma invoicing in 2014 and requires an alternative approach for its rental vehicles (Fleet News, September5 2014).

He said: “Some rental companies will charge for damage they don’t put right at the time.             

“What we say is, if you don’t repair it, you forgo your right to charge for the vehicle repairs. We spend £2.5 million a year on 2,000 rental cars and so the charges that were coming through were substantial.”

A spokesman for the British Vehicle Rental and Leasing Association (BVRLA) said it maintains its position that it is supportive of pro-forma invoicing. 

“BVRLA members are required to provide justification for all charges raised and demons-trate a method of calculation for such charges,” said the spokesman. “They are not required to repair the damage and may refer to a damage charge matrix.”

The BVRLA refused to comment further on whether the rental industry should move away from pro-forma invoicing as a result of the Trading Standards investigation.

Tate said: “If one of our drivers put a small dent in a door, Siemens would be sent a fee, but the rental company won’t repair the dent there and then. Then when a different customer has the vehicle and puts another dent in the door they’ll be charged a fee too.

“When the rental car comes to the end of its time on the rental fleet, let’s say six months, it will then be repaired before the vehicle is de-fleeted. The cumulative damage is then banked up pro-rata.”

Tate suggests rental companies should calculate correct repair damages after the car has been repaired and split the bill appropriately between those that have caused the damage.

He admitted that many rental companies see this way of working as too complex to administer. Rental companies also don’t want to repair cars as and when if the damage is small enough not to affect the vehicle operationally, because they want to reduce downtime and “sweat the asset” during its short window of operation, he said.

Jason Moseley, National Body Repair Association (NBRA) director, said the investigation will also highlight what he believes is the building pressure from big corporates forcing bodyshops to work with “opaque practices and poor commercial terms”.

The BVRLA declined to comment on Moseley’s remarks.

Moseley said: “Terms are agreed with bodyshops like labour rates, discounts on parts, discounts on paint and another 10% discount on everything they do.

“It’s bargain basement for the bodyshop, the middle man gets a discount and the consumer doesn’t get passed on the benefit of that discounted work. That’s the main problem with this; the consumer isn’t seeing what’s happening behind these deals.”

Tate’s advice for fleets was to make sure all drivers carefully inspect rental cars before moving them.

He said: “Make sure you pick up on any damage and report it immediately with photo evidence and an image of the odometer to prove the car hasn’t been driven.

“If you don’t do this, as soon as you drive off in the car and miss any damage, you will be invoiced for it.”