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Average end-of-lease charge jumps to £290

Date: 10 August 2009   |   Author: Tristan Young

Fleets have seen a 9% increase in end-of-lease charges in the past 18 months as defleet charges become accepted at the norm, according to auction giant Manheim.

David Mercer, managing director of Manheim's defleet services division said: "2009 has seen a stronger focus on end-of-life charges. The average lease end charge is now £290. It was £265 in 2007.

"End of life charges are seen as part of the business now for lease companies. It's not a profit centre but it is better cost management.

He also pointed out that a typical 20,000 vehicle fleet has the potential to see £1.4m of additional charges per year and they are likely to be budgeting to collect at least 70% of this amount. According to Mercer: "It was more like 30-35% 10 years ago."

The news follows recent comments from BusinessCar blogger Daimian James on defleet charges suffered with vans: "The really annoying thing is that we all know the faults won't be fixed prior to going for auction. Commercial vehicle buyers at auction are not going to expect a six-year old vehicle to be pristine after all.

"To me that means that the leasing company gets paid twice. Once from me for the damage and then again when the vehicle is sold at auction."

This view appears to be backed by Manheim's data.

"In 2009 the average reconditioning spend at auction at £87 is up 10% on 2008," said Mercer. "On average they are getting three times the value of repair back due to time it takes to sell and the price."

Interestingly, Manheim suggested lease firms were unconcerned by the impact of end-of-contract charges on the relationship with the fleet manager as customer retention only ran at about a 33%.