Longer leases and warranties to match fleet replacement cycles
【Summary】FleetCheck suggests that fleet lease contracts and warranties should be lengthened to align with longer vehicle replacement cycles post-pandemic. The company has observed that cars are now being operated for close to five years and vans for up to seven to eight years. Fleet shortages during the pandemic have forced fleets to operate vehicles for longer, demonstrating that longer cycles can be economically sustainable.
FleetCheck is recommending that fleet lease contracts and warranties be extended to align with the new replacement cycles that have emerged post-pandemic. The company, which specializes in fleet management software, has observed that cars are now being operated for close to five years, compared to the previous 3-4 years, while vans have seen an increase from 5-6 years to up to 7-8 years.
Peter Golding, the managing director, pointed out that the shortages caused by the Covid-19 pandemic have forced fleets to operate vehicles for longer than originally planned. This has demonstrated that longer cycles can be safely and economically achieved with proper management. Golding also noted that the higher initial prices and uncertain residual values of electric vehicles are pushing up costs, providing further motivation to lengthen replacement cycles.
However, the main challenge with extending replacement cycles is the impact on service, maintenance, and repair (SMR) arrangements. Golding argued that longer manufacturer warranties should be a part of this shift. While modern cars and vans are more tolerant of age and mileage, they still require higher levels of maintenance over time, particularly for unexpected breakdowns. Golding emphasized the need for manufacturer warranties to align with the new cycles, as some major fleet car and van makers currently only offer three-year warranties, which is insufficient for the extended operational periods of modern fleets.
Furthermore, extended warranties would likely result in manufacturers keeping SMR within franchise dealer networks for longer, which Golding believes would benefit everyone involved. Golding also acknowledged the human resources considerations associated with longer replacement cycles but noted that objections from drivers have been limited. In many industries, car drivers are accepting five-year replacement cycles because modern vehicles not only last longer mechanically and electrically but also maintain their cosmetic appearance over time.
Overall, FleetCheck's recommendation to extend fleet lease contracts and warranties aims to address the new realities of post-pandemic replacement cycles and the challenges that come with them. By aligning warranties with extended operational periods, fleets can ensure the safety, economic viability, and proper maintenance of their vehicles.
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