BVRLA News, September 2010

BVRLA News

www.bvrla.co.uk September 2010

The newsletter of the British Vehicle Rental and Leasing Association

Lease accounting rules: why they affect all of us The BVRLA believes leasing and rental will remain the dominant form of business vehicle finance, despite a proposed change to lease accounting rules announced last month by the International Accounting Standards Board (IASB).

Although the proposed standards would impose an extra reporting burden, they would only apply to companies that report to International Financial Reporting Standards (IFRS). Most UK firms report to the UK’s generally accepted accounting principles (GAAP) and would remain unaffected.

The association responded to the IASB’s announcement by saying that it was confident its members could adapt their business models and help their customers with any extra information burden that the proposed standards would impose.

Even if a company is affected, bringing leased vehicles onto a firm’s balance sheet would not erode the key commercial benefits of leasing, said BVRLA chief executive John Lewis.

As already reported in BVRLA News (July 2010), the IASB’s proposals are intended to bring all leased assets onto the balance sheet, giving a more complete picture of a business’s financial position.

Action point More detailed information about the proposals and their impact on members and their customers can be found on the BVRLA website.

If introduced, they would ensure publicly quoted companies leasing an asset – whether a computer, vehicle or property – would be required to account for it, giving greater transparency to investors and other users of accounts.

This new approach to lease accounting, called the ‘right of use’ model, differs substantially from the current standard, which does not require operating leases to be reported on the balance sheet. Under the new model, a lessee would identify the right to use a leased asset on its balance sheet and a corresponding liability to make rental payments.

“Leasing has proved its value, sheltering companies from the risk of fluctuating vehicle values and freeing precious working capital that would otherwise have been spent buying an asset,” said Lewis. “Our members already advise fleet operators on how to reduce costs and emissions and I am confident they can add more value by helping customers with their reporting requirements.”

The IASB consulted widely before finalising its lease accounting proposals, but, according to the BVRLA, seems to have ignored requests to make the new standards simple.

“The board has come up with a ‘one-sizefits-all’ proposal which means that a lease will be dealt with in the same way, whether it is a ten-year lease for an aircraft or building worth millions of pounds, or a three-year lease for a car worth £10,000,” said Lewis.

“It is unfortunate that the standard-setters were unable to come up with a simpler way of accounting for shorter-term, lower-value leases like those used in our industry, which do not usually have a material impact on a company’s accounts.”

Following the publication of the draft standard for lease accounting, the IASB will hold a further consultation before publishing a final standard in the first half of 2011. n

bvrla.co.uk

In this issue Better licensing is ‘too expensive’ says DfT The Department for Transport’s executive agencies cannot afford to upgrade their IT systems page 2 Ash cloud cash: can Cable come through?

The BVRLA has called on Vince Cable to back compensation for rental firms that suffered from the volcanic ash-induced flight ban earlier this year page 2 Workplace parking levies attract interest The government says parking levies are up to councils – but they should consult businesses first page 4 Consumer concerns may impact car rental Office of Fair Trading studies of business practices could bring change to the sector page 5 Staged accidents reach record high ‘Crash for cash’ scams are costing insurers £350m a year, says the Insurance Fraud Bureau – learn the telltale signs to watch out for page 5

— Promoting responsible road transport since 1967 —

Comment DfT says it can’t afford to improve licensing system

Workplace parking levies and proposed lease accounting regulations will test the mettle of vehicle rental and leasing companies – but could also present opportunities to those who can innovate and provide added-value solutions.

And it is worth remembering that, despite the alarm bells rung at the time, none of the previously introduced taxes, regulations and standards have had the devastating impact that some ‘experts’ predicted.

Editor Toby Poston, toby@bvrla.co.uk 01494 545700 Production Manager Steven Prizeman, steven@bvrla.co.uk 01494 545710 Advertising Nora Leggett, nora@bvrla.co.uk 01494 545713 © Copyright BVRLA 2010 BVRLA News articles may be used copyright free by members provided that an acknowledgement is given.

BVRLA River Lodge, Badminton Court Amersham Buckinghamshire HP7 0DD T 01494 434747 F 01494 434499 E info@bvrla.co.uk W bvrla.co.uk Honorary Life President Freddie Aldous Chairman Kevin McNally Vice Chairman Neil Cunningham Honorary Treasurer Brian Back Chief Executive John Lewis

The Department for Transport’s executive agencies cannot afford to streamline vehicle licensing by upgrading their IT systems – that was the message delivered to the BVRLA at a high-level meeting last month.

changes to IT systems would not be taken forward. However, the DfT was interested in the idea of issuing fleet operators with an electronic copy of the registration certificate instead of a paper one when they register a new vehicle.

The association met with a senior DfT official to express its frustration with getting the Driver and Vehicle Licensing Agency (DVLA) to recognise that fleets require different processes to private motorists.

With regard to the Vehicle and Operator Services Agency (VOSA), discussions centred on the BVRLA’s recent letter to Transport Secretary Philip Hammond – sent jointly with several other industry bodies – concerning the approved testing facility (ATF) regime for heavy goods vehicles (see page 3).

The BVRLA is unhappy that, in the 21st century, its members still have to spend an estimated £10m each year dealing with the millions of pieces of vehicle documentation required by the Driver and Vehicle Licensing Agency (DVLA).

Although the department said it understood these concerns, it also made it clear that any solutions requiring

The association believes ATFs pose difficulties for the industry, with few companies so far electing to become registered as testing facilities. It was agreed that more discussion was needed about how VOSA’s plans for ATFs could be taken forward in the current economic climate. n

Association appeals to Cable over ash cloud compensation for industry The BVRLA has again called for the vehicle rental industry to be compensated for the losses it suffered as a result of the volcanic ash-induced flight ban earlier this year.

The call came in a letter to the Secretary of State for Business, Innovation and Skills, Vince Cable, last month.

Following advice from the European Commission that claims for compensation must be directed to national governments, the association has asked Cable to consider compensating the rental sector due to the number of bookings that were cancelled and refunds given while the airports were closed.

The BVRLA has expressed its willingness to work with the Department for Business, Innovation and Skills to

Photo: Crown Copyright

In recent years fleets have had to cope with new congestion charges, low-emission zones and corporation tax changes. Just as the industry has got to grips with these, legislators and standard-setters look set to deliver another couple of challenges.

Cable: will he back compensation call?

determine a methodology for calculating lost revenues. n BVRLA News | September 2010

Industry bodies to discuss ATFs with VOSA BVRLA chief executive John Lewis and his counterparts at the Road Haulage Association, the Freight Transport Association and the Society of Motor Manufacturers and Traders are due to meet senior government officials in coming weeks to tackle the issue of heavy goods vehicle (HGV) testing.

The letter indicated that option three would be the preferred outcome.

“Given the lack of progress with ATFs we have concluded that the complexities of having VOSA staff testing trucks at third-party workshops is unworkable,” said the BVRLA’s Lewis. “We therefore shared the views of the other trade associations that the government needs to review its strategy.”

The four trade associations recently wrote a joint letter to Transport Secretary Philip Hammond to express their dissatisfaction at plans to change the current testing regime. These centre on the introduction of new authorised testing facilities (ATFs), which are run by private companies but staffed by civil service examiners. In their letter, the associations proposed three options for improving the current ATF strategy.

2 Privatise the testing function but continue with a single organisation, or small number of organisations, providing examiners, and possibly taking over some test sites, but conducting a large proportion of tests at third-party workshops.

1 Conducting the majority of tests at sites run by the Vehicle and Operator Services Agency (VOSA).

3 Follow a similar model to car and van testing and have tests carried out by approved individuals.

VOSA: its testing strategy is under debate

Transport Minister Theresa Villiers has now invited all four associations to a meeting with senior civil servants at the Department for Transport to discuss how their proposals fit in with the department’s wider attempts to improve efficiency and reduce the burdens on business.

Separately, VOSA chief executive Alastair Peoples has invited the associations to a meeting to discuss their concerns about the testing strategy. n

Sunday Times’s Smith to speak at BVRLA conference Award-winning economics journalist David Smith has confirmed that he will be one of the keynote speakers at the BVRLA Industry Conference 2010.

Economics editor of The Sunday Times for more than 20 years, Smith will give an update on the state of the economy and prospects for the future. He joins transport minister Mike Penning, VOSA chief executive Alastair Peoples and other confirmed speakers from CAP, DAF Trucks, the RAC Foundation, Thatcham and Vauxhall.

The theme of the December event is ‘sustainable transport in an age of austerity’.

The full conference programme and booking details can be found here.

Join a Europe-wide debate on vehicle testing Vehicle testing is being debated across Europe following the launch of a consultation by the European Commission.

concern that low-mileage, wellmaintained cars are being tested too often, and high-mileage cars and light commercial vehicles not often enough.

The Commission is interested in harmonising testing standards and frequencies across the European Union.

This echoes discussions in the UK, where transport minister Mike Penning has confirmed there will be a review of current MOT arrangements later in the year.

The BVRLA will be responding to the debate in Europe through the European trade body Leaseurope. In the UK, the association is particularly interested in the date of the first MOT test, which must currently be no later than three years after a car or van is registered.

Penning has not yet indicated what the review will entail, but has expressed BVRLA News | September 2010

Meanwhile, the association is lobbying for the UK government to extend its review of testing to the commercial vehicle

sector. The association believes that as commercial vehicles are inspected, on average, every six to eight weeks, and new vehicles have diagnostic equipment to alert the operator to a variety of faults, it is unnecessary for them to be tested in their first year of registration – as is the case at present.

Comments on testing standards and frequency should be directed to legal services executive, Amanda Brandon. n Contact Amanda Brandon, amanda@bvrla.co.uk 01494 545701

Councils warm to workplace parking levies The government has no plans to stop local authorities introducing workplace parking levies (WPLs), but wants to ensure that businesses are consulted beforehand.

A recent report in The Daily Telegraph claimed that a number of other councils are considering such schemes.

The Core Cities Group, which represents Birmingham, Manchester, Bristol, Leeds, Liverpool, Newcastle and Sheffield, is also reported to be considering them.

Photo: Lee J Haywood

Nottingham City Council is due to impose a £250-a-year levy on businesses for each parking space they use from 2012. This could rise to £350 within two years.

if a council is considering a workplace parking levy scheme.”

Nottingham: what would this local man think of workplace parking levies?

Robert Kingdom of Masterlease believes the proposed levies could become a major headache for businesses. He said: “It is possible that companies may pass the cost onto their employees, whether this is through a simple annual charge or perhaps by running a car parking pay-per-day scheme. But some fleet car drivers may well argue that their vehicle serves a business function and, as such, they should not be expected to pay to park at work. Organisations may decide to bring in a third party, such as their fleet management company, to administer their payments.”

WPLs were introduced to tackle congestion and cut carbon emissions, but the BVRLA opposes them as a tax on business. The association believes they will have little or no effect in reducing harmful emissions or congestion, especially where employees have no other options for travelling to work. n

Communities and Local Government Secretary Eric Pickles has urged councils to seek other ways of raising revenue, and the Department for Transport (DfT) wants businesses to be consulted before WPLs are introduced.

“It is for local authorities to consider what measures are appropriate for improving transport and tackling congestion in their area,” said a DfT spokesperson. “We are looking at how best to ensure the views of local business are represented

Salary sacrifice: OFT guidance

Euro NCAP tests new cars and backs new safety technology

Following a major take-up of salary sacrifice car schemes in recent months, the Office of Fair Trading (OFT) has responded to a BVRLA request to provide greater clarity on how they should work.

Euro NCAP, the independent car safety assessor, has announced that it will complete tests on a range of new electric vehicles early in 2011.

Under a salary sacrifice scheme the employee typically agrees to surrender part of their salary in return for a non-cash benefit such as a company car. BVRLA members asked whether the schemes fell within the scope of consumer credit law – thereby requiring employers to hold a consumer credit licence.

There is no simple answer, but the OFT’s guidance, setting out key principles, is now available on the association’s website.

Advice is also available from BVRLA head of legal services Jay Parmar. n Contact Jay Parmar, jay@bvrla.co.uk 01494 545706

From next month, it is also introducing NCAP Advanced, which will provide car buyers with guidance about the safety benefits of new technology, including lane departure warning, blind spot monitoring, autonomous braking and attention assist.

With so many new and differently branded car safety technologies hitting the market, Euro NCAP says it wants to provide independent advice for confused customers and give manufacturers an incentive to make the equipment a standard fit across all their model ranges.

Research published earlier this year by eSafetyAware, a non-profit organisation

that promotes eSafety technology, highlighted a lack of awareness and understanding of the importance of active safety systems.

It found that less than a third of UK fleet decision-makers looked for a Euro NCAP rating when purchasing cars and vans.

Only 41% said their fleet policies had specified safety equipment in vehicles and substantial numbers were unaware of, or uninterested in, the latest electronic safety technologies.

“BVRLA members have played a major role in advising companies on how they can reduce motoring costs and emissions,” said the association’s chief executive, John Lewis.

“It is time for the industry to start pushing road safety as just as important a priority.” n BVRLA News | September 2010

Consumer concerns may impact rental Three studies of business practices being undertaken by the Office of Fair Trading (OFT) and the Department for Business, Innovation and Skills could impact the vehicle rental sector.

The OFT is studying contracts and examining when, how and why contracts may cause difficulties for consumers.

One of the OFT’s initial findings was that consumers renting cars incurred penalties that were not explained or were hard for them to avoid.

The OFT is now planning to study the car rental process in greater detail. The outcome of the study could be advice for consumers and businesses engaged in renting, or a recommendation for consumer-protection legislation.

Another OFT study is examining how well consumers are made aware of prices for the goods and services they buy and rent. It is addressing a variety of pricing practices which might mislead consumers,

Staged accidents reach record high ‘Crash for cash’ scams where car accidents are staged in order to claim on another driver’s insurance, are at an all-time high, according to the Insurance Fraud Bureau (IFB).

The bureau estimates that around 30,000 accidents were staged in the UK last year, costing insurers about £350m and adding £44 to the premium of every vehicle owner in the country.

Birmingham was the top fraud hot-spot, with many accidents also taking place in Liverpool, Blackburn, Manchester, Leeds and London.

Aon, the risk management and insurance broking company, has created a list of tips to help rental companies spot fraudsters (see right). It says that car rental is seen as an easy target for these scams because the hirer has no long-term connection to the vehicle involved, making it more difficult to track their history. n BVRLA News | September 2010

including so-called ‘drip pricing’ – where price increments are added during the buying process. When the study was launched, the OFT cited car rental as a sector that it feels uses drip pricing.

It is considering whether it would be better for consumers in all sectors to be automatically ‘opted in’ for the most popular optional extras. If adopted, this approach is unlikely to impact the car rental industry as the majority of its optional charges are not taken up by most customers. The BVRLA is due to attend a meeting later this month on the outcome of the study.

The Department for Business, Innovation and Skills (BIS) has also issued a call for evidence on ancillary and contingent charges, such as administration, fuel and excess mileage.

The government believes a case may exist for it to regulate charges which, from the consumer’s perspective, do not form part of the ‘essential bargain’ with the trader.

These charges are said not to be subject to normal competitive pressures because they are not actively considered by consumers when entering into a contract.

In its response, the BVRLA contended that these charges do not need to be regulated as they are penalties for losses or costs incurred by members as a direct result of action by renters and are driven by cost recovery. The association believes it demonstrated that it plays a vital role in regulating its members through its code of conduct and quality assurance programme, and that additional regulation is therefore unwarranted.

Members wishing to comment on these subjects should contact legal services executive Amanda Brandon. n Contact Amanda Brandon, amanda@bvrla.co.uk 01494 545701 The BVRLA’s response to BIS can be downloaded here.

How to guard against fraudulent claims Pre-rental ❱ Know your own area – get to understand your typical customer. ❱ Count the key fraud indicators – is the hirer from outside your normal catchment, only requesting a one-day hire, paying cash? ❱ Train your staff and don’t leave inexperienced employees to complete bookings. ❱ Make sure customers know what to do if they suspect a scam has taken place. Information gathered at the scene can be vital.

Post-incident ❱ Watch for efficiency – an overly helpful hirer who shows familiarity with the information you’ll need when reporting an incident may be a well practised scammer. ❱ Count the key fraud indicators – where and when did the crash take place, and does this match the hirer’s intended use? A hirer who knows a lot about the other party should also raise your suspicions. ❱ Build real evidence to defend the claim –including photographs. Check that damage correlates with the driver’s version of events. ❱ Collaborate with your insurer, which is as keen as you to eradicate fraudulent claims. ❱ Check the BVRLA’s RISC Online database. Developed specifically for the rental industry, it contains the names of more than 6,000 individuals and companies that have caused problems for members. Find out more here.

Our complaint service – how to avoid it!

The BVRLA’s complaint and conciliation service is designed to assist members and customers when the member’s own complaint procedure has been pursued to its conclusion but the customer remains dissatisfied.

The association’s code of conduct says that members should advise their customers of their complaints procedure, how to use it and the additional options that are available to them – such as involving the BVRLA or the Financial Ombudsman Service (the official independent expert in settling complaints between consumers and businesses providing financial services).

Adopting this process ensures that businesses become aware of customer concerns before the BVRLA is approached, rather than after.

It is important for there to be no surprises for the customer. There should therefore be a transparent, standardised process that is applied right from the very beginning of the rental and leasing process.

Looking more closely at the leasing sector, 62% of all leasing complaints in 2009 related to end of term damage, what constitutes fair wear and tear and concerns over damage charges. n

Avoiding disputes Most customer disputes in vehicle rental and leasing occur after the vehicle has been returned. Here’s how to keep problems to a minimum.

❱ Vehicle condition reports should be easy to understand, show damage that is readily identifiable, and be signed by the customer. ❱ Providing customers with photographic evidence of damage by email could reduce complaints.

❱ The BVRLA’s code of conduct gives customers the right to arrange for an independent inspection report. ❱ The BVRLA has produced a handy document summarising the key points of a typical daily rental agreement. A copy can be downloaded here.

New digital format for BVRLA Fair Wear and Tear Guide The BVRLA’s Fair Wear and Tear Guide is now available to corporate members in a new digital format, under an annual licence.

The guide provides a professional, easyto-use reference tool for customers. It can be personalised with a company’s own corporate branding before being ‘embedded’ in a page of its own website – just as BVRLA News appears on the BVRLA website.

The industry fair wear and tear standard

bvrla.co.uk

for drivers of leased and financed cars

Marshall Leasing www.m arshall -leasin

g.co.uk

With 62% of all complaints received revolving around end of contract charges, the BVRLA believes that its digital Fair Wear and Tear Guide is an ideal way for members to inform their customers of return standards and improve customer satisfaction. For details contact member services executive Steph Czaplinska. n Contact Steph Czaplinska, steph@bvrla.co.uk 01494 545702

John Ball, Fraikin chairman and former MD, dies John Ball, former managing director of Fraikin and a member of the BVRLA Commercial Vehicle Committee, passed away on 26 August aged 57.

John Ball joined Fraikin in 2000, bringing more than 25 years of industry experience to the role. He was instrumental in helping the company grow from a fleet of 1,600 vehicles to the 14,000 vans and trucks it manages today.

He also took direct responsibility for the company’s acquisition of Lex Transfleet

in December 2005 – the largest deal of its type in the industry for a decade.

For health reasons Ball stepped down from his day-to-day activities as Fraikin managing director last October, but continued as chairman of Fraikin Ltd. Before joining Fraikin, Ball also held senior positions at the Iveco Group and Ryder after heading logistics at Ushers Brewery in Trowbridge, Wiltshire.

He is survived by his wife, Debbie, one daughter and two sons. n

Ball: instrumental in Fraikin’s growth

BVRLA News | September 2010

BVRLA Industry Conference 2010 Heritage Motor Centre Gaydon, Warwickshire • 2 December

Sustainable transport in an age of austerity Hear experts including transport minister Mike Penning, VOSA chief executive Alastair Peoples and Sunday Times economics editor David Smith share their insights and experience, giving a vital perspective on key business issues. Topics include: The Economy ❱ How will the government’s spending cuts affect the economy?

The Future of Fleet ❱ Which new cars, vans and trucks should we be looking out for in 2011/12?

❱ Are we heading for a double-dip recession? ❱ What are the prospects for inflation, interest

❱ What are the ultra-low-carbon vehicle options for fleets?

rates and bank funding?

❱ What impact will the latest generation of vehicles have on the aftermarket?

The Road Transport Roadmap ❱ What is the government strategy for cutting road transport emissions?

❱ How can we tackle congestion and improve the UK’s road infrastructure? ❱ Does freight transport deserve special Also appearing: CAP, DAF Trucks, the RAC Foundation, Thatcham and Vauxhall

Download your programme and booking form here supported by

sponsor

Committee meetings 2010 Committee of Management

18 Nov

Chairman’s Committee

28 Oct

Commercial Vehicle Committee

30 Nov

Leasing & Fleet Management Committee

21 Sept

7 Dec

19 Oct

Rental Committee

5 Oct

Leasing Broker Committee RVR Forum Committee

23 Nov

16 Sept

9 Dec

SMR Forum Committee

25 Nov

Risk Management & Security Committee

Training programme 2010 Fair Wear and Tear Standards

Dunton Park

Selling Contract Hire

Amersham

Fair Wear and Tear Standards

Dunton Park

Certificate in Fleet Consultancy

Amersham

Fair Wear and Tear Standards

Dunton Park

(module one)

23 Sept 20-21 Oct 26 Oct 16-17 Nov

This one-day course in fair wear and tear standards is run by BVRLAaccredited training provider Manheim Inspection Services. It is delivered through a mixture of classroom and ‘hands-on’ workshop sessions and is ideal for staff who regularly discuss vehicle condition and those in business development roles.

Contact Fran Hampson, frances@bvrla.co.uk 01494 545703

Intended for staff in technical service departments, this Automotive Technician Accreditation aims to boost individual careers and professional development while improving an employer’s reputation for professional excellence. Regulated by the Institute of the Motor Industry (IMI) the accreditation lasts five years and would be a good addition to a CV. Skills are assessed through an online test and practical assignments designed to test advisors on real-life situations.

The assessment, which only takes half a day, can be carried out at the candidate’s own business premises.

Contact Fran Hampson, frances@bvrla.co.uk 01494 545703

Certificate in Fleet Consultancy Module One: 16-17 November Amersham

Devised in association with the Institute of Car Fleet Management (ICFM) and accredited by the Institute of Leadership and Management (ILM), this course is aimed at senior sales executives and account managers.

It covers key principles of fleet and asset management, policy purpose and delivering fleet solutions, including finance and acquisition needs.

30 Nov

In-house training – dates available upon request For further information about all BVRLA courses, contact Nora Leggett: nora@bvrla.co.uk, 01494 545713

BVRLA News | September 2010

Fair Wear and Tear Standards 23 September, 26 October, 30 November Dunton Park, Warwickshire

ATA Technical Customer Service Advisor Assessors can be booked at dates to suit candidates

treatment?

Scenes from last year’s conference

Training courses

Contact Nora Leggett, nora@bvrla.co.uk 01494 545713 7

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