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ClimateNE & Climate Change Schools Project support the move to a low-carbon, resilient economy and help businesses avoid risk and realise commercial opportunities. Posts by Jen Atkinson, Krista McKinzey and Harriet Thew » Is your company firmly embedded in the world of Contract Hire to procure vehicles for your business?
If so, prepare to be bitten on the rear end! For as long as I can remember Croft has used Contract Hire as a means to source all sorts of vehicles as there are some sound reasons to do so.
The obvious reasons are that your company does not have to manage the risk of residual value deviations, maintenance cost arguments are not your problem and in our case, it allows us not to have a full time Fleet Manager.
Enter stage left the quotations for our batch of cars due to be replaced in September. I wish the lady who handles renewals within Croft, Margaret Welsh, had said "put your tin hat on" before giving me the bad news. A like for like quote for a Mazda 6 over a three year term, with no increase in the list price, resulted in a ã104 per month increase. And before my heart started to beat normally again this good lady followed up with "and there is a 3% list price increase on the way as well."
I am trying to come to terms with what the Contract Hire companies are trying to achieve with this move. Is it to recover from the horrible losses they must have been hit with because of the unpredicted drop in residual values, particularly over the last 12 months? Surely they can't be expecting these values to drop even further at the same alarming rate over the next three years!
Of course, if the price leasing companies get when they send "end of term cars" to auction is some ã3,000 or so down from the book value they would like to achieve then surely this is compensated by the current list price being discounted by a similar amount.
Where is this leading to for our company? Have we hit the point where, during this current turbulent time, we revert to outright purchase? There are deals to be done however a strict and tough write down policy needs to be in place and provisions for remedial repairs and servicing costs need to be considered to ensure the profit and loss account isn't hit with black holes.
However these things are trivial compared to the return of the ding dong battles that will take place between Margaret and the service outlets we will use over why they are charging us for brake dust cleaner and who asked them to charge us to fill up the washer bottle with expensive windscreen washer fluid!!!!
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