Courtesy cars: Finding the right mix for your bodyshop

Finding a reliable source for bodyshop courtesy cars is becoming more and more difficult. How many cars do you need? How much should you expect to pay? Are all contracts the same? Should you lease, rent or buy?

Before considering the options, assess the key drivers. Given that the most significant influence is likely to be work provider contract requirements, it’s vital to talk openly to a senior executive within an insurer, accident manager or fleet operator about the potential number and value of jobs to be undertaken.

Factor in monthly fluctuations in demand, looking particularly at historical patterns, and also consider any requirements for specialized vehicles (eg automatics, small vans). The duration and reliability of work provider contracts including renewal dates and notice periods varies enormously. Some insurers are looking for long-term relationships with repairers offering dedicated repair volume to improve efficiency, containing costs.

This provides greater security to repairers and allows courtesy car requirements to be better planned.

When considering demand, it’s advisable to talk to courtesy car suppliers to see if these trends are mirrored in other bodyshops. Market trends – including claims frequency, insurer performance, insurer policyholder ‘books’ and contract values – should all be taken into account.

Tony Parish, MD of this year’s AM Bodyshop of the Year award winner Alton Cars, says: "Always try to plan ahead and stay abreast of market conditions – it only takes two insurers or two motor manufacturers to merge to affect your business mix."

Further considerations include the anticipated frequency and duration of loan periods, and an understanding of courtesy car vehicle makes, models and specifications, including anticipated customer preferences.

Many customer complaints stem from the age, type and even colour of courtesy vehicles, and not from the quality of repair work.

There’s a world of difference between leasing, rental and purchase of courtesy cars. Much depends on a bodyshop’s profile and how much administrative and financial risk is involved.

Look at depreciation, trends towards vehicle upgrades, light van schemes and rising volume of total losses. Double-check work provider contracts for stipulations (eg type, age and condition of loan vehicle required, transfer of insurance cover, recovery of damages or fines from drivers, company policy on taking deposits).

Those opting for the most popular choice of vehicle supply, leasing, should ensure they fully understand the implication of contract length.

Lease contracts are usually 12, 18 or 24-months. The longer the contract, the longer the price guarantee. However, the longer the contract, the less flexibility to adjust fleet size to reflect market conditions.

#AM_ART_SPLIT# Parish is committed to leasing: "Don’t opt to buy your fleet. There are too many headaches. Leave it to professional leasing companies,” he says. “And don’t always assume that customers require a car. Buy a decent bodyshop management system to measure KPIs including cycle times and courtesy car utilization."

Any courtesy car contract length over 12 months may mean the vehicle isn’t covered by manufacturer’s roadside assistance. Tyres, brake discs and service requirements will all come into play in assessing cost.

Also, the older the car, the more abuse it will suffer. This will impact on customer perception of your business, your customer’s work provider and will probably mean greater rectification costs. Consider whether you want to use a broker or a funder. Brokers can operate on behalf of a number of different suppliers but may find it difficult to provide a consistent level of service.

Funders, meanwhile, have access to all vehicle details, will underwrite the fleet, pool mileages and advise on fleet management.

The largest courtesy car leasing company in the UK is Circle Leasing with more than 10,000 vehicles deployed through 400 bodyshops.

Circle managing director Aidan Minogue, says: "Dealing with a dedicated courtesy car provider makes sense because we understand the pressures bodyshops face and are on hand to provide back up service.

"We pre-purchase vehicles in keeping with predicted customer demand in order to supply vehicles when bodyshops need them. Our relationships with manufacturers mean we offer consistent pricing and supply."

Repairers should work with a supplier on a long-term basis in the same way they do with distributors to gain understanding and trust.

Cars need to be ordered well in advance to ensure the exact model, colour and quantity is available – and choose a mainstream make and model of vehicle to ensure good in-service back up. Also, talk to other bodyshop colleagues about their supplier experiences.

Read contracts, and then read them again – especially the small print. Don’t assume all contracts are the same, even from the same supplier.

Top tips to save money

Calculate true whole life costs allowing for any penalties and make sure all potential costs are considered.

Check features and benefits, like contract terms (some suppliers tack on an additional month’s payment).

Also check for:

Collection and delivery charges

Mileage limits and penalties

Servicing requirements

Refurbishment policy (the longer the contract term, the more the vehicle is subject to abuse and potential damage)

Back up for breakdown, theft and total loss management

Parking fines and other offences

Keep on top of performance by using three key ratios, which require the following information:

Loan vehicle cost: Total cost of courtesy cars in the month (including rentals, insurance, admin, fines, etc)
Fleet size: Number of courtesy cars on fleet in the month
Number of issues: Number of cars issued to customers in the month
Total labour sales: All labour sold (£) by the business in the month

The industry average for courtesy car costs as a percentage of labour sales is 7-8%, which means that for every £100 of labour sold, up to £8 is absorbed by the car fleet. Calculate as follows:

Loan vehicle cost divided by (total labour cost x 100)
eg: £12,000 / (£160,000 x 100) = 7.5%

The industry average cost per courtesy vehicle currently lies between £110 and £120 per month, and can be calculated as follows:

Loan vehicle cost divided by number of loan vehicles
eg: £12,000 / 104 = £115.38

The industry average number of issues per courtesy vehicle is 2.5-3 per month, meaning that each courtesy car is issued to around three customers per month. Calculate by:

Number of issues divided by number of loan vehicles
eg: 265 / 104 = 2.55

Armed with these three monthly KPIs, you can keep a close eye on your courtesy car fleet performance.

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