Lease and Warranty Durations in Need of Adjustment
【Summary】FleetCheck is calling for longer lease contracts and warranties for cars and vans to align with the new post-pandemic replacement cycles. Due to the Covid-19 shortages, fleets have been operating vehicles for longer periods, and FleetCheck believes that longer replacement cycles can be achieved safely and economically. The main challenge is adjusting service, maintenance, and repair arrangements, and FleetCheck argues that longer manufacturer warranties should be part of this shift.
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 moved from 5-6 years to up to 7-8 years.
Peter Golding, the managing director of FleetCheck, stated that the post-Covid shortages have forced fleets to operate vehicles for longer than originally planned. This demonstrates that longer cycles can be safely and economically achieved with proper management. Additionally, the higher initial prices and uncertain residual values of electric vehicles are pushing up costs, providing further impetus to lengthen replacement cycles permanently.
Golding believes that longer manufacturer warranties should be part of this move to longer replacement cycles. While modern cars and vans tolerate age and mileage better than in the past, they still require higher levels of maintenance over time. Golding argues that manufacturer warranties should align with these new cycles, as the current warranties provided by several major fleet car and van makers are inadequate for the lengths of time for which vehicles are now being operated.
Extended warranties would also likely result in manufacturers keeping service, maintenance, and repair (SMR) within franchise dealer networks for longer. Golding believes that this would make sense for all parties involved.
Golding also acknowledged the human resources considerations associated with longer replacement cycles. However, anecdotal evidence suggests that objections from drivers are limited. Many industries have seen drivers accepting five-year replacement cycles because modern vehicles not only last longer mechanically and electrically, but they also maintain their cosmetic appearance over time. Employees are content to keep a car for longer if it continues to look good.
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