Power to the Fleet Manager
“Information is power” goes the popular corporate maxim.
If true, the typical manager of a large vehicle fleet is in a powerless position when it comes to end-of-lease recharges. An area of contention for leasing companies and fleet managers, the situation could be transformed with better sharing of information.
Unleashing the power of information would bring benefits to both parties. Fleet managers could reduce their de-fleeting costs, and lease companies could avoid cost, administrative hassle and lost goodwill with customers.
Attention span too short
Most fleet managers show laser-like focus when entering into leasing supply agreements. Negotiations are tough, with fleet managers wringing out every possible percentage point to achieve the best deal for their company.
Less vigilance is shown at the other end of the process, when it comes to de-fleeting. According to a 2009 study by Fleet News UK, 28% of fleet manages don’t review the condition of end-of-contract vehicles prior to returning them to the leasing company.
This is at a time that recessionary pressures are making leasing companies enforce their re-charging policies more aggressively than ever before.
Leasing companies are only doing what is commercially sensible, trying to extract fair market value for their vehicles, but the results are big recharge bills for fleet managers. A  UK study put this at over £120 million annually, so current figures are probably considerably higher.
It’s not just a matter of financial cost for organisations with large fleets. The leasing companies themselves are impacted in direct and indirect ways.
The cost of responding to fleet manager queries about de-fleeting charges are significant, as is the time involved in processing and following up disputed invoices for re-charges. Even though they normally use reputable auction houses to carry out inspections before the end of contract, many lease companies experience problems with getting re-charges paid, resulting in significant write-offs.
Perhaps even more damaging for the leasing companies is the bad-will generated by this often fractious process, threatening to derail relationships with large and profitable fleet customers.
Probably the clearest evidence that end-of-lease transactions can be a bumpy ride, is the fact insurance companies are even offering products specifically aimed at this issue, covering refurbishment costs for returning a vehicle within fair wear and tear standards.
There must be a better and cheaper way for fleet managers?
A better way
Although most leasing companies use independent inspections, it doesn’t seem able to eliminate re-charge disputes, even though there are accepted industry standards like the British Vehicle Rental and Leasing’s ‘Fair Wear & Tear Guide’ in the UK.
Of course mistakes can be made in the inspection process, and fleet managers often perceive serious inconsistencies in inspection approaches between different leasing companies and different vehicle brands.
Another issue is that staff using vehicles are not always visible to the impact of their behaviour on the end of lease process. For example a Fleet News UK study found that almost 20% of staff using fleet vehicles were not aware of the potential costs to their employer of returning a vehicle in poor condition.
A key to improving the defleeting process is sharing inspection information so fleet managers have more power. Power resulting in smoother, and ultimately more profitable relationships for both leasing companies and fleet users.
Using technology is the most efficient way to spread this information. Instead of leasing companies largely controlling the end of lease inspection process, technology could help put some information and therefore power into fleet managers’ hands.
For example, a simple iPhone application or website system could enable fleet managers with dispersed vehicles to implement at least first stage inspections. Staff drivers could conduct a basic inspection according to a set process, record and photograph any damage and report that back to fleet management.
Fleet managers could then organise local service providers to complete repairs, at a significantly lower cost than what the leasing companies will charge. The fleet manager would also gain transparency around their leasing companies’ inspection i.e. a visual and text record with which they could reconcile the end-of-lease inspection.
This whole process could be shared online with leasing companies so the end of contract inspections they conduct take the company’s own inspection into account. Everybody knows what happens, everyone trusts and is willing to participate. Everyone has some information and therefore some power.
Fleet Manager benefits
More responsibility on drivers
Data to help analyse fleet performance of certain vehicles (e.g. are certain shades cheaper to repair if damaged)
Leasing company benefits
Faster end of contract disposal
Lower re-charge write-offs
Less wasted administration time