FLEET MANAGEMENT – LEASE TERMINATIONS 101

We’re often asked by fleet management clients what constitutes ‘fair wear & tear’ at the end of a vehicle lease, and conversely what degree of damage should they expect to have to pay for.

LESSON 1: Understand the expectations

Some leasing firms are well known for being very “thorough” during the end of lease inspection process, this can result in disputes and ultimately very aggrieved clients.  We’re often asked to provide second opinions of both the scale of damages claimed by the leasing firm and also the costs involved.  Most often this relates to body work.  Some of these cases involve many thousands of dollars on a single vehicle.  A Fair Wear & Tear guide should be included in the lease documentation, but clients often don’t familiarise themselves with the criteria until it’s too late.

LESSON2: Know your facts so you’re in a position to dispute unjustified charges

Leasing firms cannot simply make up the rules as they go along and get away with anything they want.  So be aware of the Fair Wear & Tear guidelines relating to that leasing firm and that type of vehicle.  They are not all the same, there are differences for instance between passenger cars and light commercial vehicles.  Secondly, undertake your own lease termination inspection BEFORE the leasing firm uplifts the vehicle, and document any visible defects.

What constitutes damage?  Damage is called excessive wear and tear in the leasing industry and will be repaired at the leasing firm’s discretion and charged back to the client, sometimes with a premium added to the price depending which firm is involved.  Fair wear and tear will include general appearance, missing or damaged keys & remotes, bodywork, paintwork, bumpers and trim, windows, glass and mirrors, tyres and wheels, mechanical condition and interior condition. The following is a summary of what’s generally acceptable for a passenger vehicle and what’s not acceptable. The parameters for light commercials will be more generous.

Windscreen

• Acceptable: Minor chips and scratches outside the driver’s line of sight (Critical View Area or CVA)
• Not acceptable: Any chips, cracks, holes or scratches in the CVA

Bumpers

• Acceptable: Minor scuffs, usually up to 25mm in length.
• Not acceptable: Deep scuffs, broken paint, dents, cracking and impact damage.

Bodywork

• Acceptable: Small stone chips, dents under 10mm, light scratches up to 25mm.
• Not acceptable: Dents over 10mm, impact damage, and multiple minor dents on one panel, broken paintwork. Any substandard collision repairs or general panel & paint work

Wheel rims

• Acceptable: Minor kerb damage with scuffs usually up to 25mm.
• Not acceptable: Deep kerb damage, buckled or bent alloys.

Interior

• Acceptable: Small scratches on scuff panels and plastics, slight wear to upholstery.
• Not acceptable: Deep scratches to any surfaces, ripped seals, permanent staining to upholstery, any screw holes or other caused by fitting of accessories

Terminating vehicles should also be returned in a reasonably clean and tidy condition – some suppliers do go as far as charging for car cleaning in extreme cases.

LESSON 3: Maintenance, maintenance, maintenance

It’s important to consider that for every bit of excessive wear and tear on a leased vehicle, you are going to pay for it – in some cases at a price that’s going to recover the lease supplier’s costs, not necessarily just the direct price of repairs.  The good news is there are some simple principles that will help minimise termination costs.  It is generally more economical to maintain vehicles to a high standard during service rather than allowing them to deteriorate over a three or four year period in the mistaken belief that it will be cheaper in the long run – that is a fallacy.  A branded vehicle is also a mobile bill-board for your company so it makes sense to maintain it to a high standard of presentation to reinforce the quality message of your product or service.

Making good use of insurance cover is also recommended – when accident damage occurs, make a claim and get the damage repaired. If yours is the not-at-fault vehicle, your insurance company will pursue the other party and your excess should be reimbursed.  It is also important to understand that all body repairs must be completed to a high standard. Do not pursue ‘cheap’ panel & paint repairs, it is a false economy and any substandard work identified by the leasing firm will be re-done at your expense – so in effect you will be paying for the job twice.

LESSON 4: Accountability

Whether pool cars or driver dedicated, if a vehicle is damaged, somebody did it – hold them accountable.  This is the single most effective tool in mitigating termination repairs, and will have the added bonus of reducing the accident rate too.  Smart fleet managers use a range of simple protocols including:

• Monthly vehicle check sheets to identify body damage and action any required repairs
• Policies requiring completion of an insurance claim form for every incident regardless of how minor. These don’t necessarily need to result in a claim but either way ensure damage is documented and send the message that drivers must be accountable. This will help create an environment where accidents are actively discouraged.

A fleet management company or accident management specialist can provide valuable technical advice, resources and practical support to help maintain the fleet to a high standard cost effectively.  Crash Management also provides the 24/7 front line accident logistics co-ordination and driver support services including rescue and repatriation plans to ensure compliance with Health & Safety legislation. Talk to us about how we can help you save money and keep drivers safe.