Managing down end-of-lease charges

A common fear amongst those leasing a vehicle or fleet is the prospect of paying additional end-of-lease charges at the end of your agreement. Fortunately, there are simple things you can do to try and avoid these costs.

Familiarise yourself with our guide to end-of-lease charges – and tips for avoiding them – to enable you to sit back and enjoy the ride in your new vehicle, without worrying about further fees.

What are end-of-lease charges?

End-of-lease charges are additional fees, charged to you, to cover extensive damage to a vehicle. For cars, the BVRLA Fair Wear and Tear Guide outlines what is considered acceptable damage.

Typically, you won’t have to pay for minor scratches and damage to the vehicle, but anything above and beyond this is likely to result in a fee passed on to you.

Why are end-of-lease charges applied?

The forecast value (or residual value) of a vehicle at the end of a contract hire agreemen takes into account an amount of depreciation from the new vehicle price. This residual value is based on the vehicle being returned in an appropriate condition for its age and mileage.

In a sale or auction, a car in poor condition won’t achieve its true value; the same applies here. Leasing companies carry the risk of depreciation for you, so end-of-lease charges exist to cover the loss in sale proceeds as a result of the vehicle being returned in a condition that impacts its value.

Reputable leasing companies, Hitachi Capital included, adhere to the BVRLA Fair Wear and Tear Policy. These guidelines identify the acceptable condition a car should be returned in to reflect its age and mileage. If you damage the car beyond this, it’s likely you’ll have to pay for the damage when you hand it back.

The end-of-lease process

At Hitachi Capital Vehicle Solutions, we use two independent companies to provide end of lease inspection reports. One covers cars and small vans; the other, specialist vehicles and lorries.

Their findings dictate the cost passed on to you. There is an expectation that cars will come back without major dents and scratches, whereas commercial vehicles will often be granted a little more leeway.

How can I avoid end-of-lease charges?

Our guide below outlines seven simple steps to reduce the likelihood of you facing end-of-lease charges.

1. Choose your colour wisely

Repairs to special option colours can be costlier, whilst unusual colours - particularly greens and browns - are harder to match. Consider your colour carefully when taking out an agreement.

2. Clean your vehicle regularly

It’s easier to spot damage on a clean vehicle; where necessary, you can then carry out repairs during the course of the agreement, as opposed to waiting until the end.

3. Maintain your vehicle throughout the agreement

Ensure you keep an eye on the oil level, tyre pressure and bodywork throughout your agreement, so you don’t have to shell out for new tyres and other repairs sooner than expected.

4.Check in with your hire compan

Talk regularly to your leasing company to understand their policy on repairs. It might be cheaper to repair dents and scratches with your local body shop, provided the work is completed to an acceptable standard. Recharges can arise if previous repairs were done badly.

5. Repair minor damage

A small chip in a windscreen can lead to a large, expensive crack. Repair any minor damage while it’s cheap to do so and avoid a small chip or scratch turning into something much bigger and harder to repair.

6. Report any incidents

If you’re a business customer, encourage your drivers to report any incidents, regardless of how minor, so you can keep on top of any repairs. Note down third party details and have the damage checked by a body shop before the vehicle is returned, to ensure repairs are up to scratch.

7. Inspect the vehicle before returning it

You might choose to have a vehicle inspection carried out by an independent qualified engineer, who will use the BVRLA ‘Fair Wear and Tear’ guidelines to assess whether any damage to the vehicle should be chargeable or not. This is worth considering around five weeks before you’re due to hand the vehicle back, especially if you are uncertain if the damage on a vehicle will lead to additional charges.

 

 


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