Vehicle recharges are rising rapidly, what can Fleet Managers do to protect their companies?
Recent findings published by the fleet media indicate that the amount of money typically charged by leasing companies against returned vehicles is going up, and by double digit percentages year on year.
At CLM, we help our customers keep these costs down, we’ll share with you how we do this and how we’ve saved our clients around 30% of their initially invoiced recharges.
Did you know that there are guidelines that lessors should follow around re-charges and there are things that you can do to protect your company? Read on to find out why recharges are made, how you can mitigate them, and the industry standards for the reasonable levying of such charges.
What are end of contract recharges?
When a vehicle is leased, the cost is calculated by taking into account the difference in the value of it from the point that its leased, to the point your company hands it back. The lessor takes the risk on the future value of the vehicle instead of your company.
The accurate prediction of future value is fundamentally impacted by the age of a vehicle, its mileage and its overall condition. If a vehicle is returned to a lessor and it is over mileage, has missed services, is not complete, or is not in a condition commensurate with its age and mileage, then a lessor will charge your company. The charges are made because the lessor will not be able to sell the vehicle for the price it expected to, and will seek to recoup its losses.
Recharges in a market context
The average recharges on cars and vans levied by funders are studied by the media and the British Vehicle Rental and Leasing Association (BVRLA). Recent reports would suggest the average lease vehicle recharge level on a car is around £400 and a van £500.
In 2019, of the cars returned at the end of their contracts where the client adopted our pre-return inspection service, we saved them on average 34% of the bill their lessor initially presented to them.
In the scenario above, a fleet manager would see a £400 bill reduced to £264. The £136 saved valuable of course … but imagine how that saving could rack up over a 500 vehicle fleet.
Of vans returned, we saved our clients on average 30% of the bill their lessor initially presented to them.
The most common recharges
The most common things that we see that lead to recharges are:
Where original equipment is missing, it is well worth you being aware that a leasing company can legitimately charge you for these items, even if there is some scope for returning them later. Many leasing companies send their vehicles to auctions immediately and items cannot be reunited with these vehicles later.
The guidelines for making re-charges
Most companies operating in the vehicle leasing market are members of the BVRLA. The BVRLA issues guidance to its members on levying end of contract recharges, and its members generally follow it.
The Fair Wear And Tear Guide is published by the association and CLM has its branded version of the guide that can be reviewed here.
Fair wear and tear is an expression that is worth reflecting on because no lessor expects a vehicle, that may be three years old and have 60,000 miles on the clock, to be in exactly the same condition as when it was delivered new. Fair, really means allowable or acceptable in the context of deterioration.
The BVRLA guidance addresses all sorts of things from scratches and stone chips to wheel scuffs and upholstery damage. Photographic evidence of acceptable and unacceptable damage are presented to help vehicle assessors.
Here are our tips for minimising cost at the end of lease contract:
Recharges and CLM
As a fleet management company, rather than a vehicle funder, CLM doesn’t make recharges. What we do on behalf of our customers is act as an intermediary between our client and their vehicle funders.