MANY years working in leading roles in the leasing and vehicle management industry created our commitment to contract hire and our belief that this product was the panacea for company cars, a straightforward and cost effective solution, writes Peter Hollinshead, director of FleetSAVE.
After working independently with private and public sector customers, we have been surprised by some widely held negative perceptions, particularly with SME small fleets. And our own experience of the product service sometimes provided has not lived up to the high standards that we expected. Here’s why.
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Customer mistrust
Customers have regularly expressed a mistrust of contract hire.
Whilst they appreciate the fixed cost rental principle, the lack of transparency in quotations leads them to assume that significant profit is hidden within the price, and that the risk / reward ratios are loaded in favour of the suppliers.
Four common reasons why businesses don’t use contract hire
- Suspicion that they’re being ripped off – often because they are poorly informed about how contract hire works and how suppliers make their money;
- Poor service from ‘off-the-shelf’ providers that re-inforces this suspicion. Small fleets are especially vulnerable to this;
- Fear (which can be justified!) of end of contract charges;
- Failure to understand the full costs of in-house company car management.
They conclude that the customer is effectively paying an inflated premium against the inherent risk factors.
These concerns are often compounded by difficulties in obtaining accurate, promptly delivered quotations, with appropriate advice where required.
Small and medium fleets in particular will usually experience an off-the-shelf service proposition, which is delivered at arms length and does not take account of the client’s needs.
There is also a strongly held perception that end of contract charges provide the supplier with opportunities to enhance their profits with stringent clauses enthusiastically applied.
This leads some companies to believe that they are better off accepting the risks of acquiring and managing their own vehicles, or in some cases feeling trapped in agreements that are not providing the anticipated advantages and savings.
