Lessors’ reputations are at
stake due to end-of-lease charges. Mark Smulian
reports.
Go deeper with GlobalData
Kelvin Mackenzie still has an influential
voice even if the days when, as The Sun editor,
he accused Freddie Starr of dining on a hamster are long past.
So when he recently took to his old paper’s pages
to lambast Mercedes-Benz Finance (MBF) for what he described as a
rip-off for billing him £1,800 for end-of-lease work, it stoked
fears for the leasing industry’s image.
He has said he will go to court, and suggested that
MBF managing director, Robert Middleton, deals with the bill in a
manner most people would find physically impossible.
But Mackenzie’s robust strictures are the tip of an
iceberg as concern mounts in the vehicle leasing industry that
customer unhappiness over these charges might do serious damage to
its reputation.
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By GlobalDataOnce an industry gets labelled a ‘rip-off’, it can
prove extremely hard to lose the moniker.
Areas of dispute
Most commonly, arguments between lessors
and customers centre on whether the condition of a vehicle, when it
is handed back at the end of a lease term, is to do with ‘fair wear
and tear’ – or something else.
Leasing companies might have been tolerant about
vehicle conditions before the credit crunch. Their priority at the
time was to get their cars back from customers so they could be
quickly re-sold for tidy profits.
The recession has changed things. With resale more
difficult, the vehicles that sell most rapidly are those in the
best condition, and if they need repairs at the end of a lease the
cost must be accounted for.
But lessors’ increasing lack of tolerance regarding
vehicle condition might not do them many favours.
Graham Hill, who runs the GHA Finance motor finance
brokerage and author of An Insider Guide To Car Finance,
says he has “received a lot of feedback on end-of-lease charges
imposed” and that none has been favourable to the reputations of
lenders or the industry.
He has some sympathy with the industry when
customers make extravagant claims for ‘wear and tear’, and
acknowledges that some leasing companies face large losses in
resales and are looking at ways to recover these.
“But recover them at what cost?” he asks. “I am
having more and more clients refuse to use a funder because of a
bad end-of-lease return experience.”
Reputations matter, are easily lost, and are only
slowly, if ever, won back after costly public relations work.
David Singleton, news editor of PR Week,
warns: “If any industry has an opinion-former like Kelvin Mackenzie
waging war on it, it is something you would want to nip in the bud
or you could have a PR crisis.
“The industry does have a defence but people like
Kelvin Mackenzie tend to have a better story to tell, and if
something like this gets onto social networking nowadays it can
spiral.
“The industry would have every reason to be
concerned and it needs to state its side of the story as strongly
as it can.”
Customers fight back
When customers feel aggrieved they often
turn to local trading standards authorities, but so far such
complaints are rare, according to Peter Stratton, Trading Standards
Institute motor industry specialist.
“There have been a number of people concerned about
the situation in which leased car customers find themselves,” he
says.
“The British Vehicle Rental and Leasing Association
[BVRLA] publishes guidance for companies to send to customers to
warn them about the condition a car being returned should be in,
but to my mind that is probably a bit late and it should be made
clear what is expected at the start of the lease.”
Stratton advises that customers returning a vehicle
should protect themselves by being present when it is examined for
the lessor and keep a note of any disagreement about its
condition.
They should also thoroughly photograph the vehicle
on a phone camera so that they have evidence in any dispute.
Mercedes-Benz public relations manager Rob Halloway
declined to comment directly on Mackenzie’s case, and says: “The
Mercedes-Benz return standards are based on industry standard
guidelines issued by the BVRLA.
“Our objective is to have as little work to do on a
vehicle as possible in order to minimise defleet time and
resourcing, and the costs to customers.
“Mercedes-Benz Financial Services only charges back
to customers the costs it incurs in bringing the vehicle up to the
return standard in line with the terms and conditions. No profit is
made by us in this process.”
Halloway adds: “Our policies and procedures are
clearly explained in all literature sent to customers.”
BVRLA chief executive John Lewis says the return
process “should be straightforward and transparent”, and points to
the association’s conciliation service to resolve disputes.
He notes: “In previous years, leasing companies
have been more lenient with these charges, mainly because they were
happy to share the benefits of a used car market that was
over-performing against residual value expectations.
“Although the current market has picked up from the
lows of 2008 and early 2009, it is certainly not over-performing
against forecasts.”
Commercial reputations lost are hard to
restore – the best strategy is not lose them in the first
place.
