CommercialFleet

End of contract charges increase for vans

Row of vans

The average end of contract (EOC)charges for vans increased by 12% over the past 12 months, from £376 to £420, according to the latest data from the FN50.

Nearly half of all vans attracted these charges, up from 44% in 2018.

Vans tend to see higher figures compared with cars due to the nature of how they’re used as fleet workhorses with a higher likelihood of attracting bumps and scrapes. But the jump in charges is at the highest level since Fleet News started to record data for vans back in 2015.

This has been combined with a drop in the average damage waiver from £168 in 2018 to £134 last year. This tallies with the increase in vehicles being charged, as the threshold for waiving damage charges has been reduced by 20.2%.

The highest average charge for vans was £678 and this came from a leasing company within the top 10.

The lowest average charge was £65. This company also had the lowest charge for cars and sits in the final third of the FN50 table.

When isolating the top 10 largest leasing companies, which account for the vast majority of fleet volumes in the UK, the average was £482, a 15% increase compared with the overall average. However, this increase could be explained by the highest charge recorded which was from within one of the top 10.

The BVRLA updated its Fair Wear and Tear guide in April 2019 to help improve clarity over what drivers need to do to avoid end of lease charges, where they can get advice on routine maintenance, servicing and appraising the vehicle at the end of the lease and what they can expect the day the vehicle is returned, as well as how to complain if things go wrong.

Some leasing companies have long been accused by fleet managers that their interpretation of the BVRLA guide ends up with damage charges being used as a profit centre.

However, one fleet manager who preferred not to be named says that, including a £250 waiver for charges, the EOC for his vans has been fair.

He says there does seem to be variance between leasing companies in how they approach EOC, with some sticking to the BVRLA’s guide more than others.

The fleet manager says: “There is a mix between leasing companies and it really depends on their policy on EOC charges.

“We have dealt with others where the vehicle charges are so high that they’re repairing vehicles back to retail standard before putting them into the dealer network.

“These are working vehicles and we have seen some of our vans looking brand new once they’ve had these EOC repairs completed.”

Another fleet manager says he is dealing with one van leasing specialist where the charges appear very high and there is a lack of detail on what is being charged for.

He says he had been drawn in by a low monthly charge and then has been hit with the return damage costs.

He adds: “We have also been questioning charges where we think we should because we were recently charged for a missing set of spare keys. The driver was adamant they were supplied and it turned out it was the defleet company that lost them, rather than us, so on that occasion we managed to get the charges overturned.”

Nick Hardy, sales and marketing director at Ogilvie Fleet, was surprised by the increase for vans but said there could be a number of factors behind the jump.

He said: “We’re all doing a lot more vans, so there is a greater volume in the market as it’s growing.

“I think the leasing market also has a much better understanding of what kind of condition these vans need to be going back to auction to sell. Van buyers are becoming much more picky.

“Age and mileage could also be a factor here. If vans are older and with more miles on the clock they will have more damage. So, in theory, there wouldn’t be as much of an expectation that they should look brand new.

“However, if you have had more 12-24 month contract vans coming back, but they are badly damaged, there is going to be a higher percentage of charges to get that van looking retail-ready.”

Caroline Sandall, chairman at fleet operators association ACFO, said the increase year-on-year for vans is higher than she would have expected and it does raise concerns, particularly with the review of the BVRLA guidelines this year, a process ACFO was closely involved with.

She says: “It could be that, as we haven’t had a full year from the new guidelines in April, they may not have been adopted across the FN50.

“The guidelines aren’t mandatory either, so it might be that some leasing companies haven’t adopted them at all.

“We have been pushing for the BVRLA to make the guidelines on EOC mandatory or incorporate them into their code of conduct.”

Sandall says the BVRLA guidelines are where they should be after the update and ACFO is happy that the changes made in April make the rules around EOC clear and transparent for fleet managers and drivers.

She says: “Nobody wants to return to the days when EOCs were used by some as a profit centre. The UK leasing market is under pressure right now so I hope that isn’t driving some leasing companies to look at EOC as a way to make profit back.”

Sandall advised fleets to keep an eye on their processes and do everything they can to limit damage in the first place.

This includes reviewing damage before the van reaches the end of contract to see whether it falls outside EOC guidelines or whether it may be more appropriate for the damage to be repaired by a repairer, weighing up which will be more cost-effective.

Sandall adds: “This is much more preferable than spending management time on challenging every item, but fleet managers should keep their eye out and still challenge where appropriate.”

Truck figures rise 18%

Trucks show a similar picture to vans with the average charge at £725, a big double-digit increase year-on-year of 18% or £111 difference.

HGVs cost more to run and maintain so the overall EOC figures will be higher compared with cars or vans, anyway.

However, the FN50 figures show there is a gulf between passenger cars which have only seen a slight rise year-on-year on average charges and commercial vehicles which have seen much bigger increases.

As leasing companies come under pressure on margins and profits, they may be less willing, or able, to offer goodwill gestures or to write-off costs on EOC charges.

The average damage waiver for trucks was £150 compared with £258 last year, which echoes what has happened with vans.

Of those companies that supplied data, the highest average charge for trucks was £800 and the lowest was £650. The highest charge was from a company in the last third of the FN50 table and the lowest charge was from one of the top 10 leasing companies.

 



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  • Paul Gauntlett - 13/02/2020 17:17

    Sensible Measures Can Reduce End Of Contract Charges. My top tips for reducing end of contract damage charges. 1) Clear communication with the driver. In your fleet policy spell out the importance taking care of the vehicle. Many employers threaten to charge employees than don't, few incentivise those that do. 2) Avoid all easily preventable damage recharges. For example the car or van came with two keys, make sure it goes back with both keys (its one of the most common recharges). 3) Rear parking sensors are sadly not standard on every van - but fitting them is common sense. Their cost is so small in comparison to the cost of damage that can be avoided. 4) Drivers who like their vehicle look after it - being engaging with drivers when selecting vehicles results in far better guardianship of your vehicle, which means lower costs! 5) Value versus price. Speak to your leasing company about what is the standard waiver. Can it be varied? Putting a bigger waiver in on your account might work for you, Factor in end of contract damage waiver and other concessions when comparing quotes. Saving a couple of pound on a rental is not good economics if the result is a big end of contract bill!

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