Top tips for fleet managers to avoid end-of-contract damage charges
End-of-contract charges, particularly those related to vehicle damage – end-of-contract excess mileage charges are also levied – were highlighted as the “cause of the biggest degree of conflict” between fleets and leasing companies at an ACFO seminar entitled ‘The End is Nigh’.
In response, ACFO’s hints and tips to fleet chiefs include:
- Make sure there is a clear understanding of the contract with lease providers: what constitutes fair wear and tear, what will be charged and the matrix that will be used for charges; the collection and inspection process; the recharge process including timings and supporting documentation such as handover sheet to be signed by drivers, photographs of damage, and cost breakdown of damage.
- Ensure company car policy and associated communications details the rules and procedures for drivers, what they will be charged and how that will be collected from them.
- Remind drivers weeks or months prior to collection of the expected return condition of the car; the process to report any incidents to enable repairs to take place prior to return; the process for handover at the point of collection; the consequences of unacceptable condition and how any excess wear and tear will be handled.
- Have a clear process in place for managing complaints.
Graham Short, chairman of ACFO’s East Anglia Region and fleet engineer at Anglian Home Improvements, which operates a 1,400-strong fleet comprising 800 light commercial vehicles and 600 cars, agreed that end-of-contract damage charges was “one of the most contentious aspects of vehicle leasing”.
But Short who previously worked as a vehicle remarketing manager for a contract hire company, added: “As fleets we are asking leasing companies to take a risk so it is fair that they make a profit, but there are steps fleet managers can take to limit their end-of-contract damage charge exposure.”
However, he said it was critical for fleet managers to explain the uses to which leased vehicles would be put during their fleet life so providers could “adjust contracts and any end of contract charges during a vehicle’s operating life”.
Anglian Home Improvements leases its company cars but outright purchases its vans to avoid the potentially huge end-of-contract charges on the latter given their usage.
Graham Short also advocated a profit share related to the sale price of a vehicle returned in good condition as a mechanism for encouraging drivers to take pride in their company car.
He continued: “Drivers need to be told to keep cars in good condition and what will happen if they don’t.”
Short also advocated:
- Pre-return checks with drivers one month before vehicles were due to be returned
- The use of reputable SMART repairers to undertake work prior to defleet
- Checks to ensure vehicle service books, wheel nut socket sets, spare keys, parcel shelf, load cover and head restraints were all returned with a vehicle
- If vehicle recharges were high then obtain a purchase price for a vehicle and sell it yourself
- Fleet managers being present at the time of collection.