The Invoice
Our story revolves around an invoice which the driver gets for penalty recharges, charged for damage which is in beyond 'fair wear and tear'. So to make sense of the situation, we have to take a good look at what this bill is all about.
Essentially, the money taken during the period of the lease doesn't cover the purchase price of the car, and the running costs. Only once they have taken back the car and resold it do they cover their costs and make their profit. So obviously the lease company want's to sell the car at the highest possible price which is hard to do if it is in a poor condition.

This problem has been compounded by the current state of the used car market. Twenty years ago a buyer would overlook a bit of rust if the car was mechanically sound, but over the years cars have become very mechanically reliable. At the same time, cars have become more delicate and less robust. For example, most cars now have big alloy wheels with low profile tyres which are easy to scuff, Black metal bumpers have been replaced with colour coded plastic bumpers, rubber 'rumble strips' are now made from colour coded recycled plastic with chrome inserts or removed from the car all together. Also gone are tough vinyl seats and thick woven fabrics, to be replaced with velour and delicate leathers. This trend is set to continue as manufacturers try to compete by adding more 'bling' [more]
What this all means is that mechanical reliability is barely a factor in resale value, while cosmetic appearance has become all important. Just take a look at the Caps price guide, a few dents, scuffs and scratches can seriously devalue a car by thousands of pounds, seriously impacting the profits of a lease company.

These cars are offered for sale to dealers who only want to buy the good ones and turn them around for a quick sale. You may think that with their trade contacts, dealers wouldn't mind buying a tatty car and doing it up for a bigger profit, but it is a little known fact that car dealers are taxed on the difference between what they bought the car for and what they sold it for, and they are not allowed to make deductions for repairs, so they will want to avoid spending any money on a car. So the ones with damage tend to go unsold. And of course, every week it goes unsold, the car is devaluing.

Whether you buy or lease a car, this problem is actually the same, but it does pose a particular challenge for the lease company which can't afford to accept low resale prices on it's cars. Because of this situation, lease companies have informed their drivers that cars need to be returned in good order, but if that message doesn't strike home, they need to fall back on penalty recharges to try to cover the cost of devaluation. However, because tatty cars just don't sell, they would much rather have the car back in good order without all the arguments.

The Driver

The problem here is that driver never really took on board that the company car was actually their car which they had full responsibility for, just as if they actually bought it.Most drivers will be aware of their insurance excess, however its the minor scuffs,dents and scratches that would not justify an insurance claim. Infact insurance companys would not rectify all these repairs with one claim. This is the grey area-who pays for this. Had they really taken on board the fact that these were their responsibility some drivers would have taken better care of the car. Obviously, some people totally abuse their cars, but most don't take quite as much care as they could do. And lets face it... it's virtually impossible to keep a car for 3 years without collection some damage.

It should also be noted that the cars have changed and the market has changed over the last few years -- many drivers that returned a car three or more years ago didn't get charged for them, they have no reason to believe anything has changed, but it has.

The second problem comes at the end of the lease. Drivers are told to inspect their cars, and to address the damage. It sounds simple enough, but it isn't -- they just aren't qualified and experienced enough to take this on. They don't want to find any damage, so often they don't! They take a quick look around not knowing that small amounts of dirt can hide damage, and that things like dents are best seen from a distance. So they miss stuff. Even if they don't, they don't know what damage is acceptable or what to do about damage that isn't.

The Fleet Manager

The problem for fleet managers is that they end up running an argument department. First the drivers argue that the responsibility for the damage should go to the company, and once that is sorted out, they have the argument that either the damage wasn't on the car (because the driver never saw it), the argument over what is fair wear, and the argument over the charges. Once those arguments are won or lost, you are now expected to phone the lease company and argue the drivers cause.

The result is that your company's employees are not happy, and the lease company doesn't exactly look forward to hearing from you either!

The Lease Company

The lease company needs to make the money back by charging for the cost of devaluation. But this doesn't make for happy customers. Secondly, even their inspectors miss damage, so they lose money. Thirdly, even after charging for devaluation, some cars won't sell, they may go through the auction a couple of times before being sold at a loss to the lease company. Fourthly, all the arguments they tend to have are over damaged cars. It would be far better for them if the cars were just returned in good condition!

Some lease companies have actually resorted to refusing to do business with their customers that repeatedly return cars in a poor condition.

The Happy Ending
In order to have a happy ending and avoid the arguments and the large bills, it is essential fleet decision makers ensure that vehicles are returned in good condition.

We can attack this problem from both ends, firstly ensuring that when a driver takes on a new car they are fully aware of their responsibilities and helped by educating them how to take better care of their cars. [more]

And near the end of the lease, having the cars honestly appraised of damage likely to incur penalties buy an experienced inspector, and having any problem areas addressed. In fact, drivers will be more willing to take responsibility for the car knowing the fleet manager has put this safety net in place and that by doing their bit they can help to avoid penalty recharges.

Having the car inspected around 5 weeks before it is due for return allows all damage to be noted, then decisions can be made about how best to repair damage in the most economical way. It also serves to end all arguments about what damage is there and what wasn't. It is essential that these inspections are carried out by a trained and experienced inspector under conditions conducive to finding damage -- where many companies go wrong is that they expect their drivers to be able to find and evaluate damage using a basic guide book. [more]

Taking the first step
Although the answer is simple, it can be hard to implement, especially of you have a very large fleet which is all over the country. If you are in the South East, you can send your drivers to us, starting them off by showing them our 6 Step Guide, but if you need a national solution, then you could contact a company like Manheim Inspection Services, who cannot only inspect your cars, but also offer BVRLA training on how to inspect cars, allowing larger companies to employ their own inspectors.

Next time you have a car to return, why not give us a try. Please see our Contact menu.

Find out why drivers don't make good lease return inspectors

Lease Return Services
Clean Image can provide a full lease return service from inspections
and appraisals to valeting and smart repair.

Valeting Articles: Index Page A list of articles on various car care and car valeting subjects

Lease Return Article: How to save hundreds
of pounds when returning your lease car.
A case study of a car inspected by Clean Image.

Lease Return Article: More benefits of our lease return inspection.
It's not just the money... There are many other benefits too!

Lease Return Article: Why Drivers don't make good inspectors.
Why drivers who inspect their own vehicles miss most of the damage.

Car Leasing Article: Company Car Leasing
A company car is the company's problem... isn't it?

Guest Article: Car Leasing - There's no escaping the cost of high mileage
Some tips on how to avoid lease return penalty charges for excess mileage.

Guest Article: Should I buy or lease my next car?
Smart Leasing 5 Step Guide on choosing a leased car.