Fleet replacement and residual risk

Settlement shortfall

Before disposing of a car on hire purchase, agree with the provider how the outstanding finance will be settled and title released. Regular hire use can increase mileage and wear; do not assume a private-use valuation fits the car. If sale proceeds fall short of settlement, the business needs an agreed way to cover the difference. Ask your provider for settlement figures and compare them with realistic trade valuations, not optimistic retail asking prices.

Where a shortfall appears, the choices are to keep the car longer, sell and fund the gap from reserves, or discuss options with the provider. None should be left to the week of sale.

Disposal timing and the earning fleet

Selling just before peak season gives up the most valuable bookings; selling after it may mean a softer market and higher mileage. The other trap is the gap between the old car leaving and its replacement arriving. A two-month delivery delay on a new car can mean two months of lost hire if the old one has already gone. Line up delivery before you commit to disposal, and keep the old car working until the new one is ready where you can.

• Confirm delivery date of the replacement before agreeing a sale
• Avoid replacing several cars in the same month
• Check how forward bookings will be honoured during the changeover

De-fleeting condition

Preparing a car for sale has a cost: smart repairs, wheel refurbishment, valeting, outstanding servicing. Under agreements with return standards, damage beyond fair wear may be charged. Budget for it and decide whether repairing before sale or selling as seen gives the better net result.

Damage and disputed claims

A car with an open customer damage dispute or insurance claim is harder to sell cleanly. Resolve repairs and record recoveries before disposal. Clear check-in and check-out records, photographs and transparent damage charging reduce disputes in the first place; the BVRLA codes describe practices its members follow, which are a helpful reference even for non-members.

When a car is written off or stolen

An insurance payout may be less than the settlement figure, particularly early in an agreement or where the car was valued at market value after heavy hire mileage. Check how your policy values a total loss and whether any gap would fall on the business. Also plan how bookings for that car would be honoured while a claim is settled, which can take weeks.

Records that help the next purchase

Keep a simple record of each car: purchase price, hire income, mileage, repair costs, sale price and settlement. Over time that history is the best evidence you have when asking a lender to fund the next one, and it shows which cars actually paid their way.

What happens after you enquire

1. 1

   Enquiry

   You tell Sorbus about the business and the vehicles. It is not an application, and no lender sees it.

2. 2

   Discussion and evidence review

   A broker talks it through and reviews accounts, bookings, licences and vehicle details.

3. 3

   Lender proposal, only if appropriate

   If it looks suitable, and only with your agreement, we approach selected lenders from our panel (not the whole market). Any decision is the lender’s.