A lot of operators i have spoken to lately have been talking of going down the line of a contract hire or rental agreement to finance new units. Just intrested to know your thoughts on it.
Good points are you have set outgoing on vehicle and maintence. Smaller outlay to run new vehicle and payments are 100% tax deductible.
Bad points you have no asset at the end of the term and the cost of damage repairs at the end can be crippling.
When I was subbing to wincanski at felix they were going through a fleet replacement programme and both the fleet manager and garage manager were telling me it was costing them a fortune on repairing the damage and extra mileage.
My employers had 6 ERF/MAN units over 3 years.
Each had cost £49,000 by the time they went back, £294,000 in total.
They sent a man with a clipboard who tried very
hard to add to this but failed, except for some
damage, because most of what he alleged was wrong with them
was as a result of poor maintenance, supposedly paid for in the £49,000.
The then TM decided to buy and see how that worked out.
He paid £120,000 for six four year old FM12 units with about 400,000km on them.
Should have kept them for 3 years, that would have worked.
He kept them for 4, by this time they were into the 900,000km
range and starting to cost serious money.
To the credit of Volvo, the engines and drive trains were fine
but the wiring and ECUs were a nightmare.
They sold for £6000 each,£36,000.
Now we don’t have any but that’s another story.
Based on this, I would advise buy, not rent, at least not with a
maintenance contract.
EDIT.
We have three tractor units left, now paid for and it’s nice to be able to stand them
when there isn’t any worthwhile work rather than have to run them for poor
rates just to keep the payments up.
Regards,
Nick.
Back in the late 90’s i worked for Hill Hire and we were just starting to push the contract hire stuff forward, as back then it was almost unheard of, and if it was heard of people were sceptical as it appeared to be to good to be true.
Back then a brand new V reg 6x2 Premium Privelage would cost you approx £1800per calender month for 4 years, For this you’d get a brand spanking new truck,within reason in your livery etc and it was all inclusive. Everything was covered bar insurance, diesel,O-license and damage costs…
I dont know how much the contract hire world has changed but surely it’s more cost effective to be able calculate your costs(within reason) for 3/4/5 years than venture into the unknown…
As mentioned, contract hire is great for a small outlay, or to have fixed costs to work from.
it can be expensive, so its good to fully go into whats on offer - I have a number of new tractors on contract hire for £320.00 per week (I’m responsible for tax + tyres) and the term is five years but with get outs at 2, 3 and 4 years.
It is possible to hire for cheaper, but I wanted new.
Also, I thought if costs go thru the roof at least I’ve got that price for five years, otherwise I can get rid of them beforehand if the work drops off.
Other than my contract hires, I bat on two wickets - buy new top of the range trucks and screw down the price - works well in the long run and I also buy three year old trucks with minimal kms (200K kms or less if you can find them, otherwise don’t bother) for less than half the new price - have them all dealer maintained, also by screwing the price down.
I think contract hire is the only way if you are considering say, Renault or Iveco as the residual is crap - buying these is suicide.
Consider spot hire as a lot of the hire companies have new kit they have put on the road without takers - new MAN XLX’s and Renault Premiums for around £360.00 all in per week is common - although going down this route you have to be prepared to be gazumped if things get a little better for the hire co - like around Xmas time etc.
Having said all that, I have an '08 reg DAF 105 with 360K kms that this week had a turbo blow which did the catalytic converter etc costing around £5-6 grand, so I wish that one had been on contract hire!!!
K
when returning after long term hire the hire cos always try to screw the haulier for damage.
Our company never paid any invoices for damage and we always won if the hire cos took it further.
specialbru:
when returning after long term hire the hire cos always try to screw the haulier for damage.
Our company never paid any invoices for damage and we always won if the hire cos took it further.
If a truck/trailer is brand new at the start of the contract hire period then there can be no possible issues with damage surely, any damage has been caused by the customer or whilst in the customers possession therefore you are responsible, the problem occur when people take shorter term “In Fleet” deal using good condition rental trucks/trailers that are essentially secondhand.E
the hire co will attempt to charge for any mark scratch or scuff that would need to be done to return the vehicle to as new condition where in reality they cant charge for fair wair and tair .
Most hauliers just cough up but if you dig your heels in they will either back down or the haulier will win in court .
The last time this happened at our co the amount claimed after handing back 5 units was around 4 grand .
We were also awarded costs for solicitors etc on top !
specialbru:
the hire co will attempt to charge for any mark scratch or scuff that would need to be done to return the vehicle to as new condition where in reality they cant charge for fair wair and tair .
Most hauliers just cough up but if you dig your heels in they will either back down or the haulier will win in court .
The last time this happened at our co the amount claimed after handing back 5 units was around 4 grand .
We were also awarded costs for solicitors etc on top !
I’m curious as to how the haulier will win in court, you sign a contract for 4 years on a brand new truck agreeing to pay for any damages that are unrepaired on its return in 4 years time. I totally agree about fair wear and tear a scuff here and there is tolerable but ive seen some horrendous damage done on trucks/trailers just back off contract hire.
kr79:
Bad points you have no asset at the end of the term and the cost of damage repairs at the end can be crippling.
That’s one of the things that put me off of contract hire. I don’t smash trucks up, but I have heard numerous stories of contract hire trucks being returned at the end of the contract, with the hirer being charged thousands of pounds, for even the most minor wear and tear.
Additionally, I won’t tie myself into even a two-year contract. If things don’t work out after three months then I can just sell my truck for a thousand pounds less than I paid for it and walk away.
I am taking a chance on there being some type of catastrophic mechanical failure shortly after I buy it, but that’s a chance I’m prepared to take, and the reason I travelled from one end of the country to the other to see it before I did the deal.
That’s the thing I’ve heard of people been charged for complete resprays because of stone chips.
As you say you don’t know what’s round the corner so even if you lee a few quid selling it you can walk away.
Return conditions are always a thorny issue at the end of any contract hire.
However, if you use a reputable company they will be members of the BVRLA.
(British Vehicle Rental And Leasing Association)
The BVRLA has published guidelines regarding fair wear and tear for leased vehicles and your reputable rental Co. should adhear to them.
Ask for a copy before you sign the contract and you’ll know exactly were you stand regarding return terms and conditions.
Any problems at the end of the contract should be able to be sorted out,
bvrla.co.uk/Publications/Mos … tions.aspx