3 ways contract hire firms make a profit
- Arranging the finance – this is profitable, but margins are tight;
- Fleet management – this is offered, and charged, as an additional service. Once businesses understand what it’s really costing them to do it in house this can look like a bargain;
- Re-sale value – this is the risky one. If they get it right, contract hire firms can make money here – in the order of £500 per vehicle. Get it wrong, and they can lose just as much.
When ignorance isn’t bliss
However, on the other side of the coin, we have found that when asked, many companies don’t know the real cost of running their company cars, regardless of whether they are outsourcing or operating in-house.
Records are inconsistent or incomplete and responsibility for managing the fleet is often attached to an individual’s role and is not their primary job function. This means there is likely to be a lack of control, expertise and experience, which we believe generates the mistrust that we have often seen.
Companies which do take the contract hire route need to ensure that they apply sufficient time and resource to properly manage the relationship with their supplier.
They must understand the terms and conditions that they need to operate within and demand that their suppliers give them the tools to help them do just that.
For their part contract hire companies need to deliver what they have promised and should be open and transparent in their methods, which would engender greater trust and loyalty from their customers.
Conversely, when companies decide to take the risks and responsibilities of running their company cars in-house they must ensure that there is appropriate experience, expertise and resource dedicated to the task.
