Longer leases and warranties to match fleet replacement cycles.
【Summary】FleetCheck suggests extending fleet lease contracts and warranties to align with longer replacement cycles. Post-pandemic, cars are being operated for close to five years and vans for up to 7-8 years. The higher costs and uncertain residual values of electric vehicles are pushing fleets to lengthen replacement cycles.
FleetCheck is advising that fleet lease contracts and warranties on cars and vans should be lengthened to align with the new 'real-world' replacement cycles post-pandemic. The company has observed that cars are now being operated for close to five years, compared to 3-4 years previously, while vans have seen an increase from 5-6 years to up to 7-8 years.
These longer replacement cycles have been driven by post-Covid shortages, which have forced fleets to operate vehicles for longer than originally planned. FleetCheck believes that longer cycles can be safely and economically achieved when properly managed. Additionally, the higher initial prices and uncertain residual values of electric vehicles have created an overall impetus to lengthen replacement cycles permanently.
FleetCheck has observed that many companies are now leasing vehicles for longer periods as a matter of course. However, the main challenge with longer replacement cycles is the impact on service, maintenance, and repair (SMR) arrangements. FleetCheck suggests that longer manufacturer warranties should be part of this move to address the increased maintenance needs of older vehicles.
While some manufacturers already offer warranties ranging from 5-7 years, there are major fleet car and van makers that only provide three-year warranties. FleetCheck believes that this is inadequate for modern fleets and the extended lengths of time for which they now operate vehicles. Aligning manufacturer warranties to the new replacement cycles would be beneficial for all parties involved, as it would likely keep SMR within franchise dealer networks for longer.
Despite potential human resources considerations, objections from drivers to longer replacement cycles have been limited. FleetCheck notes that in many industries, most car drivers are accepting five-year replacement cycles. Modern vehicles not only last longer mechanically and electrically, but they also maintain better cosmetic condition over time. Employees are content to keep a car for longer if it continues to look good.
In conclusion, FleetCheck recommends lengthening fleet lease contracts and warranties to align with the new post-pandemic replacement cycles. This change is driven by the longer operational periods of cars and vans, as well as the higher costs associated with electric vehicles. FleetCheck also suggests that longer warranties should be accompanied by appropriate SMR arrangements and highlights the acceptance of longer replacement cycles among drivers.
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