One of the most contentious aspects of managing a fleet of lease cars is the prospect for charges at the end of the contract. Fleet managers often complain that lease companies don't apply their rules regarding damage to lease cars in a consistent fashion. If you talk to a few fleet managers then you are also bound to hear some dark mutterings about lease companies using end of contract charges to bolster their profits.

In actual fact, there are a lot of misunderstandings about the nature of end of contract charges. If fleet managers do some research and take various precautionary actions then they can ensure that the charges they face at the end of their contracts are as low as possible.

Make sure that end of contract charges are part of your negotiations when signing your contract 

It's important that both the fleet manager and the leasing company are clear on what is expected from the contract with regard to end of contract damage charges. There are various ways in which contracts can be tweaked to reduce fleet managers' potential exposure.​

​One option is to make drivers partly or fully liable for the cost of repairs. This tends to reduce the amount of damage drivers do to the vehicles during the period of the lease. Another approach is to offer the drivers a share of the sale price so that they have an incentive to keep the car in good condition.

Fleet managers can also restrict the options that are available to drivers of leased cars. For example, by preventing drivers from choosing easily damaged and costly to repair large alloy wheels, fleet managers can reduce the potential end of contract liability.

Make yourself aware of the BVRLA's definition of fair wear and tear 

This is what leasing companies use to determine what falls within reasonable wear of the vehicle in use and what constitutes damage. This will help you to quickly establish whether a defect will result in a charge or not at the end of the contract.

Be realistic when setting mileage limits

If you exceed your agreed limits then you will incur charges, so it makes sense to err on the side of caution and set a slightly higher limit than you think you'll need.

Perform checks on cars prior to the end of the contract

In this way, fleet managers can get advance warning on the likely size of the end of contract charges. They can then choose whether to pay the charges or have the work done themselves.

If fleet managers are to be able to make an informed decision on whether to have their own repairs completed or simply hand the car back to the lease company and face the charges, then they need to understand what is an acceptable standard of repair for the lease company.

For example, a lot of modern paint finishes cannot be simply touched up. This can result in scratches requiring whole panels to be resprayed. Knowledge like this can feed back into restrictions on options when setting up the contract.

Keep to manufacturers' servicing intervals

If the cars aren't serviced according to the manufacturers' guidelines then leasing companies will charge a fee for each car that could run into the hundreds of pounds.

Maintain good lines of communication with the leasing company

It is useful to know what the leasing company thinks about particular examples of damage to a car. Some offer apps that allow you to quickly assess damage using their guidelines.

It's worth bearing in mind that leasing companies don't charge for the cost of the repair, but for the reduction in the resale value of the car as a result of the damage. The leasing companies tend to sell the cars in the condition that they receive them rather than repair them. While the reduction in resale value and the repair cost will often be similar, there will be occasions when it is cheaper to have a car repaired before handing it back.

Give drivers a checklist of items that have to be returned with the car

Losing the spare ignition key can result in a charge of several hundred pounds if it requires the car's security system to be reset. The charging cable for an electric vehicle can be worth as much as £1,000. A checklist encourages drivers to keep these items somewhere safe.

Consider ownership for vehicles that receive heavy wear and tear

Vans and other vehicles that are used for jobs that will inevitably see them receiving dents and scratches might be cheaper to buy rather than lease. In this way the fleet manager can avoid potentially ruinous end of contract charges.

Consider selling some vehicles yourself

If a car is going to incur a high level of end of contract charges then it could be worth purchasing it from the leasing company and selling it on yourself.

Make sure that your drivers are aware of their responsibilities

They should report damage immediately and it should be repaired as soon as possible. Drivers should also report regular mileage updates to make sure that they are keeping to the limit imposed by the contract.

It is also important to keep the car clean. Build ups of dirt can result in paint becoming discoloured or even rust.

Ensure that the fleet manager is present at each car hand over

This is important to ensure that damage reports and any resulting charges are agreed between the leasing company and the fleet manager.

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Jul 12, 2016 By Esther Nelson