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GOOD AS NEW?

3rd February 2005
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Which of the following most accurately describes the problem?

The condition of returning lease trucks is often

the source of dispute. Steve Banner finds out what's acceptable — and what's not...

What constitutes fair wear and tear can be a major cause for dispute between lessor and lessee when a truck is returned at the end of the agreement.

The lessor may be left aghast at the sight of big dents in the cab doors and torn upholstery. -I've known operators send vehicles back in an awful state," says John Ball, UK managing director of Fraikin.

Equally, the lessee may complain that the job of fixing every minor chip and scuff is being charged for at premium prices, despite the fact that it's impossible to run a truck for five years and keep it in as-new condition. "I still hear horrific stories from around the industry of customers being stung over repair costs," Ball observes.

It's an area of friction that's long concerned both the British Vehicle Rental and Leasing Association (BVRLA) and the Freight Transport Association (FTA). Last year they teamed up to publish a booklet entitled Fair Wear and Tear Guidelines for Heavy Goods Vehicles that shows in pictures what should be accepted as fair wear and tear — and what should not.

Iveco Ford — as it was then — produced similar guidance several years previously.

These guidelines concentrate on trucks that are around three to four years old.

As far as the cab interior is concerned, moderate wear to mats and carpets and general seat fabric wear should not be penalised, it contends. However, mats worn into large holes and ripped seats peppered with cigarette burns certainly should.

Large portion of chips

The odd stone chip on the front of the cab shouldn't cause too much excitement,especially if it's been touched in. But if the chips are so numerous that they're almost impossible to count, and nothing has been done about them, the operator can expect a bill.

The BVRLA/1-71A booklet has plenty to say about bodies too. For example, top corner damage to a box body is OK if it's been neatly repaired. A clumsy last-minute patch on a top corner that makes the damage look even worse than it actually is, isn't.

Nor are unrepaired holes, however small, in a curtainsider's curtains.

It must be stressed that these guidelines are just that —guidelines —and this should be borne in mind when assessing the condition of trucks that are older or younger than the target age group. It should also be borne in mind when reviewing trucks that are working in especially arduous conditions; going in and out of landfill sites, for instance.

That said, the guidelines have received widespread support from both truck manufacturers and independent leasing operations.

"Obviously the customer should adhere to the return conditions set out in the contract" says Tony Pain, UK marketing director at Dd. "But if you stick to the spirit of the BVRLA/ FTA guidelines you'll be pretty clear of any problems as far as we're concerned."

"We've made the guide an addendum to our main contract hire agreement." says Chris Sharp, sales and operations director at Burnt Tree and chairman of the BVRLA's commercial vehicle committee.

in any case, manufacturers and independent lessors stress that vehicles should never be allowed to deteriorate in service to such an extent that major repairs are required at the end of the agreement.

Ball contends that any damage beyond fair wear and tear ought to be noted in the workshop and fixed as soon as possible to avoid any nasty surprises a couple of years later."ff a fridge body suffers a minor dent and it's attended to immediately, then that should he the end of the problem." he observes."11 it isn't, and the damage worsens, then you could end up with serious water ingress. Of course some operators prefer to keep putting the work off because they don't want to take the truck off the road."

So who should handle the repair? Many of the major contract hire and leasing compa nies argue that they regularly deal with bodyshops countrywide, and that their purchasing power and experience in assessing whether or not the work has been carried out properly gives them the edge.

"Quite often it's more cost-effective for us to do it," Ball explains. "What we don't want is for the customer to get a cheap, botched job done and for us to have to get the vehicle repaired again."

A repair carried out at the behest of a haulier isn't usually a poor repair, however, says Mike Taylor, head of sales at Artegy "They're usually to an acceptable standard.he contends.After all, many operators — especially large ones — have close links with bodyshops, and in some cases they have their own in-house body repair facilities.

What's the damage? A Distortion could be a symptom of expensive problems Some organisations take a rather different approach to damage charging. Taylor explains: "What they may say is the projected value of the truck was £5,000, the damage it has suffered has reduced it to £4,500, so we'll bill the customer £5007 That can overcome situations where expensive repairs are being made to older, low-value tractor units whose worth is unlikely to be enhanced greatly, if at all, by the remedial work.

Bodywork. chassis, and cab interior damage aren't the only areas of concern lessors have says Andrew Jamieson, Scania's UK director of rental and marketing. "Take tyres, for example," he says. "We look for vehicles returned to us to have at least 7nun of tread depth left on each one, and remoulds on the steer axle are not acceptable.We'd also expect to see at least 40% of the brake linings left."

Jamieson adds that mechanical problems are not usually that much of a concern at the end of an agreement, as long as regular maintenance and statutory inspections have been included and the manufacturer's servicing schedule has been adhered to.

Unfortunately different manufacturers and contract hire companies adopt different policies, and that breeds confusion, says Prohire chairman David Barlow.

"Some manufacturers require vehicles to be returned with a minimum of six months left to run on their MoT certificate," he says. "Others require nine or even 12 months, with an automatic penalty imposed for failure to comply." He'd like to see everybody throughout the industry agree to the same return conditions.

"The BVRLAJFTA guidelines are a step forward, but they should not be guidelines, they Should be the basis of a formal agreement that we all adhere to," he argues. "At Prohire we've already adopted them as part of the contract we require our customers to sign, and we provide them with a copy of the booldet."

Bring in an independent

The guidelines cannot resolve all disagreements, and BVRLA members are required to bring in and pay for an independent engineer if there is a serious dispute over condition. Many lessors pay third-party engineers to assess vehicles as a matter of course so they cannot be accused of acting unfairly. But if the lessor is the paymaster, then how can the engineer be expected to give a truly unbiased opinion? That's something that concerns Barlow, who believes that both sides should contribute to the cost.

The FTA often provides the necessary engineering expertise. It prides itself on its objectivity, no matter who is footing the bill, and stoutly defends it against all-corners.

"We provide a completely neutral view," says Alan Osborne, head of audit services. "We're trying to interpret the truck's condition, not maximise its value as an asset" Return conditions affect companies such as Prohire in two ways.Trucks are being sent back to them, but they in turn have to return these trucks to the manufacturers in an acceptable condition.

"The manufacturers can have a very different understanding of fair wear and tear from the understanding that we and our customers have," Barlow claims. In his view that's another reason why everybody in the industry would be well advised to embrace the same set of standards.

Jamieson doesn't think that manufacturers are necessarily stricter about return conditions than any of the other players in the market.-1 wouldn't say we're more picky," he remarks.

MAN Financial Services managing director, Elliot Lennick, points out that manufacturers are as bound by the return clauses in the contract they have signed as lessors and hauliers are. Despite their desire to maximise the resale value of their trucks, they cannot go beyond them.

Excess mileage is another cause of disputes. Operators who have predicted that they will cover 240,000km over a three-year contract hire agreement, but in fact cover nearer 300,000krn,can end up being saddled with a massive bill. Some leasing companies will charge as much as 10p or even 20p for every excess kilometre," says Ball."In fact I've heard of one operator who was presented with a5,000 invoice at the end of three years."

Situation shouldn't arise This is a situation that should never arise if the lessor acts professionally and regularly monitors the distance covered by each vehicle, Taylor contends.

"We review all mileages annually," he explains. "Take that approach, and the agreement can be adjusted to take into account higher or lower than expected mileages long before it has run its course."

There has to be flexibility, however, according to Lennick.

"If a truck came back having covered 165,000km and we'd expected it to cover 160,000km, then we wouldn't automatically charge the customer for the extra 5,000km as a blanket policy," he says. "But if it had covered 230.000km then that would be a different story.

"There's also the point that some operators prefer not to have the projected mileage adjusted early on in the agreement,he adds. That may be because they know that the nature of the work their vehicle is on is likely to change. bringing the mileage prediction back into line. -They may of course be able to switch it to another depot handling different traffic and bring the mileage back on course that way," says Patrick Gill, UK MD of Iveco Finance.

If an operator has acquired large numbers of similar vehicles on contract hire, and they're all on much the same work.then the lessor may sometimes agree that the mileage can be pooled.

In other words, the vehicles that have covered more ground than expected can be balanced against those that have covered less, says Jamieson.

"However if a truck has covered over 25% more or less miles than expected. then we'd take it out of the pool and treat it as a separate case," he says.

"We'd take it out of the pool at around 10 to 15%, depending on the contract," Lennick reports.And Pain says: -If pooling is going to work, then in our view all the trucks involved should be registered within the same threemonth window."

Excess is not punitive Jamieson stresses that Scania doesn't charge excess mileage at punitive rates. "We'd be talking about two decimal places of a penny." he reports."But if you've got several trucks that have covered 20,000km apiece more than expected it can soon add up.

That can be seriously bad news for art operator already wrestling with tight profit margins, especially if the penalty could have been avoided with a bit more forward planning. Gill says:"There's got to be constant dialogue between the contracthire company and the customer." •


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