Average fair wear and tear charge on vans hits new high point

Nearly half of all vans incur an end of contract charge, matching last year’s figure, reports Gareth Roberts

The average fair wear and tear charge incurred by vans has increased by 4.3%, according to FN50 data.

It means fleets face an average end-of-contract damage charge of £438, having risen £18 over the year.

It is now £15.3% higher than five years ago, when it was £380. Almost half (48%) of all vans incurred charges, the same as last year.

The average fair wear and tear charge on vans is now at its highest since Fleet News started to record data for the vehicles back in 2015.

In fact, the damage incurred by vans could be even worse than these figures suggest because the average damage waiver figure applied by leasing companies has also increased. 

Now, fleets do not start paying charges until they exceed £141 on average, up from £113 a year earlier.

The true cost of damage (including the waiver) has, therefore, risen from an average of £493 to £579.

The waiver itself varies by leasing company. The highest allowance applied is £250; the lowest is £75.

A number of companies do not have a set figure; fees are negotiated with customers at the start of the contract. 

The highest average damage charge for vans reported by any FN50 company was £942 – an incredible 115% higher than the average overall. 

However, fewer than a third of its vans incurred charges - much lower than the average - and the leasing company has a high volume of customers in industry sectors where vans are worked hard in tough conditions, which helps to explain the high figure. 

The lowest stated charge was £150. Comparisons can be difficult to draw, particularly with vans, when contract lengths and the nature of their day-to-day activities, according to the sector they operate in, can vary greatly.

CONSIDER THE COMPARISONS

Simon Staton, client management director at Venson Automotive Solutions, says it’s important to consider the comparisons being made. 

“A van being used as a workhorse day-in-day-out will have more opportunity to attract damage than a van that is being used occasionally as a spare,” he explains.

Looking at the top 10 leasing companies in isolation, which account for the lion’s share of vans, the average fair wear and tear charge was £676 – 55% higher than the average overall – but was heavily influenced by also being home to the highest individual charge reported by an FN50 company.  

The British Vehicle Rental and Leasing Association (BVRLA), as it does for cars and HGVs (see panel), produces a fair wear and tear guide for light commercial vehicles (LCVs).

It provides drivers and operators of contract-hired, leased, and financed light commercial vehicles with an industry-wide accepted standard that defines fair wear and tear. The guide was last updated in April 2019 and the next review will be conducted in 2021.

Minimising or avoiding potential fair wear and tear costs can start with vehicle selection. Cars or vans fitted with advanced driver assistance systems (ADAS) and reversing cameras can mitigate bumps and scrapes.

Tusker CEO Paul Gilshan says the condition of vans on its fleet has remained “stable”. However, he says: “Costs associated with driver behaviour can be reduced by utilising telematics. 

“In addition, accident records can be monitored and risk areas identified, including speeding fines, to determine if training and/or intervention is required.”

Furthermore, he says: “Ensuring the specifications of vans are effective for their purpose from the outset can mitigate damage and the need for rectification. 

“For example, are roof racks being fitted when not needed, are parking sensors and braking technologies being added, which, although they add cost, are likely to reduce potential damage charges.”

Future damage charges could be pushed even higher, however, due to fleets extending vehicle contracts for thousands of vans during the coronavirus crisis, according to Epyx.

Looking at transactions through its 1link Service Network service, maintenance and repair (SMR) platform, used by fleets operating four million vehicles, it has produced a comparison for April-August 2020 – the height of the pandemic so far – with the same period in 2019.

It shows a rise in contract extensions with those cars incurring increased SMR costs when they passed their stated contract end.

Overall, around 10,000 additional routine services were carried out at a cost of £1.6 million.

Also, despite the Government’s temporary suspension of the requirement for MOTs, there were a further 11,000 tests for company vehicles at a cost of around £550,000.

LeasePlan recently told Fleet News that contract extensions had increased by 50% during the coronavirus crisis, highlighting the pressures faced by fleet operators.

Debbie Fox, commercial director at Epyx, explains: “Like the rest of the fleet sector, we were anecdotally aware that widespread contract extensions were occurring, but not really the full extent and these figures help to shine some light on what has been happening.

“Usually, there are very few maintenance actions concerning contract-extended vehicles on 1link Service Network but, in 2020, there have been significant numbers.

“The causes of this were probably two-fold. On one hand, getting hold of new vehicles and having them delivered was very difficult and, on the other, some fleets were undoubtedly extending contracts on existing vehicles, almost certainly in order to minimise future financial commitments while they took stock of their situation.”

Fox says that there were some further interesting trends to pull out of the data about the decisions that fleets took during the coronavirus crisis.

“One point to note is that, even while they legally had no requirement to do so, large numbers of fleets were continuing with MOTs,” she says.

“These decisions were presumably driven by risk management considerations, that ensuring vehicles still met minimum legal requirements remained important to operators. This is a choice to be applauded.

“The other is that the data also showed a considerable fall in mechanical and body repairs. This is to be expected as large number of vehicles were simply not being used to any great extent during the lockdown period.”

One-in-four trucks face damage charges

The percentage of trucks incurring end of contract damage charges now stands at 24%, according to FN50 data.

The five-percentage point rise also comes with an increase in the average fair wear and tear charge. It now stands at £429, up from £420 in 2019.

The average damage waiver, meanwhile, has risen from £60 last year to £75 in 2020.

Year-on-year comparisons, however, are difficult, because of the limited response rate from the FN50. 

A new Fair Wear and Tear Guide for commercial vehicles over 3.5 tonnes and minibuses up to 17 seats was launched by the BVRLA after this year’s figures were collated.

Changes have been made to the commercial vehicle guide in relation to chips, dents and scratches, windscreens, minor and major repairs, direct vision sensors and ADAS, in-cab cameras, passenger vehicles, and curtains and pelmets. 

BVRLA director of fleet services, Amanda Brandon, says: “Anybody leasing a vehicle should request a copy of the BVRLA Fair Wear and Tear Guide.

“It provides customers with essential advice on vehicle maintenance and upkeep to help prevent unacceptable wear and tear from occurring.

“It defines the industry standard for every aspect of the vehicle’s condition, so there should be no surprises when a vehicle is returned.”

The new guide for commercial vehicles over 3.5t has was updated following a review by an expert group of representatives from the BVRLA, including fleet operators, auction houses, de-fleet organisations, the Road Haulage Association (RHA) and Logistics UK (formerly the Freight Transport Association).