So there I was, feet up, cup of tea in
hand ready to write my article on the ‘legality’ of contract hire
end of contract charges when the news came through about Lombard
Vehicle Management cutting off brokers (see LVM cuts broker
ties).
Now while I haven’t personally used them for ages,
I was still saddened by the news. After all, when all is said and
done, they have been one of the biggest supporters of brokers over
the years.
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I’m sure there are brokers out there that have
continued to use Lombard and will be greatly affected by their
decision to axe them, especially those that write a lot of consumer
business, as Lombard was one of the few lessors left that offered
personal leasing via brokers.
But most brokers spread their net wider these days,
and with captives becoming more competitive, brokers have found
themselves working more closely with dealerships.
Why did Lombard make this decision? I don’t know:
broker business, if managed properly, is easy, low-cost business –
as Lombard will find out when reps finally have to get off their
chairs and tout for business, in the same way as brokers do, as
well as having to deal with all the problems you get when dealing
with customers.
This all adds to the cost of capturing replacement
broker business.
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By GlobalDataFor those old enough to have been about during the
last recession we found finance companies falling over themselves
to kick out brokers, as all the problems in each company were
blamed on broker-introduced business, and by doing so they
temporarily saved a few sales managers’ jobs. I hope that we don’t
see those times return.
The fact is that the broker model works; but in the
meantime, thanks to RBS and Lombard, which I believe we own, there
will be a few more loyal brokers fighting for survival.
And now for something…
Moving on to the subject I wanted to talk
about – and that is end-of-contract charges. As we know, there are
some funders who delight in trying to charge customers ridiculous
amounts of excess mileage and refurbishment charges at the end of
contract hire and contract purchase agreements, but who do you
think gets it in the neck when the customer receives his invoice –
exactly!
Are these charges enforceable? In law, finance
houses cannot charge a penalty, which is what the bulk of these
charges represent, but there is no allowance for a refund if the
vehicle is returned under mileage or in better condition than would
have been expected.
It is my understanding, and it applies to deposits,
that for a term to be enforced in these circumstances, there should
be a ‘balancing term’.
So the customer has contracted to cover an agreed
mileage and he is expected to pay for any excess mileage, but for
this to be enforceable, surely there must be a term that says that
any under mileage should attract a refund?
Maybe some of my legal colleagues could help me out
here – it’s about time I rattled a few cages, as I haven’t done
that for a while. Watch this space.
