Contract Hire Rates Vary Considerably Amid Uncertainty

Thursday, 30. July 2009

There are now some wide fluctuations in monthly contract hire rentals as many factors come into play. Amid fears that the industry is predicting the collapse of one of the major contract hire companies before the end of the year and possibly the loss of a few smaller ones, the industry is in a mess with rates all over the place. It isn’t uncommon for rates to have a spread of £50 + VAT per month between the cheapest and most expensive rates on the same car. Fleet Operations have found that in the case of a Ford Focus the spread was £123 + VAT per month. The cause of this is many fold. Interest rates charged to the contract hire companies can vary between 4% and 8.5% according to Fleet Operations who surveyed the industry. Probably the biggest cause of the wide fluctuations is the unpredictability of future car values. Some companies, who have had their fingers burned badly as a result of the slump in used car values in auction over the last 18 months, are being very cautious whilst others seem to think that the used car market will be strong from now on causing them to set higher future values resulting in lower monthly rentals. Fleet Operations say that the difference in future values can be up to £3,000. However, the big warning here is that if future values collapse again the lenders will try any way they can to extract end of contract charges out of you to make up the deficit. This could also lead to the collapse of the lender which could mean that you suddenly find yourself without a car when the administrator repossesses all the cars to sell and settle off creditors. Either way you need the comfort of knowing that you have a professional broker in the background who can support you and help to resolve the problems. In addition to the Fleet Operations warnings I have also heard that some contract hire companies, out of desperation to be the cheapest, have not only reduced their service levels but negotiated out of things like a full 3 year warranty to a full manufacturer’s warranty for year one but a reduced warranty for years 2 and 3, no road fund licence for years 2 and 3, reduced breakdown cover for years 2 and 3 if not total removal and charging for delivery and collection of the car. I also heard that someone had a documentation fee of over £300. So beware, as I always say the cheapest rate can work out to be the highest cost! Use a professional broker. By Graham Hill