The Contract Hire Minefield

/, rental/The Contract Hire Minefield

The Contract Hire Minefield

There are huge variations around the industry regarding what is provided by forklift suppliers within the context of Contract Hire (which may also be referred to as Rental, Lease with maintenance or Lease without maintenance).

Areas which need special attention

When evaluating any Contract Hire proposal the following areas must be considered and questioned:

  • Length of hire period

It is possible to quote 6 or 7 year terms to give the appearance of a reduced weekly rate. Similarly, a rate may be used which actually totals a 63 or 66 month period, but is presented as a 5 year deal

Is the agreed rate for the whole period?  Most suppliers index link either the whole of the rate or the maintenance portion, which means the customer could get an unexpected annual increase.

  • Additional charges

A popular way of keeping the rate low is to sign the customer up on a low hourly usage package, these are typically based on 500 or 1000 hours per annum, with hefty excess hour charges for any additional use above the limit set.  What looks correct in year one can be vastly different and very expensive in year 5. We know of one customer who was charged over £20,000 for excess hours on two trucks on a 3 year contract. One of our competitors in particular employs a person just to go around every quarter to check hour meters in order to produce excess hour invoices!

Another popular way in which to supplement rental income is for the supplier to charge for every scratch, dent or sign of wear & tear on the machine. It is important to clarify what out of contract charges you may be asked to pay should you damage the machine including cost of tyres and the hourly rate charged. You should establish the hourly rate for any chargeable work, including any travel costs and common parts that may be uses such as tyre, spot lights etc.

  • Service Support

We have come up against deals offering vastly different packages:

No maintenance support at all.  The customer rents the truck with any servicing, maintenance, parts or call outs being charged in addition at the full service rates.

Preventative maintenance only.  Within the contract  service visits are included, but labour, parts and travel for breakdowns outside of this are charged additionally.

Servicing and parts included.  But with the engineer’s time and mileage charged in addition.

Preventative maintenance and labour included.  Parts and mileage charged in addition.

Full maintenance cover excluding tyres, misuse and abuse is most common.

  • Replacement equipment

Most suppliers will not provide a replacement truck if your machine is out of action for any time.
What may look like a super deal often turns out to be expensive in terms of cost and operational Downtime, whether you have a breakdown or not!

By |2017-07-18T09:45:22+00:00June 2nd, 2017|Advice, rental|Comments Off on The Contract Hire Minefield

About the Author: