Loan cars -- courtesy or curse?

News Extra

To a panel shop, the supply of loan cars is like marriage: easy enough to get into but hard to get out of. Fraser McEwing investigates.

Nobody denies the practice of maintaining a fleet of loan cars is costly. One shop owner told Paint & Panel he spent more than $100,000 a year on providing loan cars, money that could make the difference between a profit or a loss in these days of tightening margins. Why didn't he drop them’ Simply put, he feared the subsequent loss of business would more than outweigh the cost of running the fleet of cars.
The size of a shop, its location, or the number of its employees do not appear to dictate the number of loan cars it might run. Christies Beach Crash Repairs in South Australia, for instance, keeps 15 cars for its customers -- even though it employs only 12 people. Owner Brian Nash said: "Some years ago a few shops in the area started to offer loan cars and then everybody had to do it. It's very costly and I'd love to do without them but they seem to be an important part of the service we offer. I know some shops have cut them out and they definitely lost business -- but then JV Crash in Adelaide also offers its customers 15 loan cars -- against an average weekly output of 30 repairs. Managing director John Verdnik believes this an essential part of his company's service -- and proclaims it in his impressive promotional brochure: "We don't send you off in a cheap rust bucket, but instead we provide you with a late model or brand new car until your own vehicle is ready.’
On the other hand, Nathans Prestige Autobody Repairs, one of Sydney's biggest shops and one of its best, has phased out loan cars. Managing director Richard Nathan now directs his customers to a rental company where they get concession rates. He cites abuse to the loan cars as the main reason he dropped them.
Wells Bodyworks in Tasmania tells a similar story. Twelve months ago the shop had a fleet of commercial hire cars that were offered on a no-charge basis to bodyshop customers.
"They became a pain in the neck," manager Paul McPherson said. "Everybody who gave us a job wanted one. We found we were spending more time arranging loan cars than getting on with the repair work. They'd come back dirty, damaged or with no fuel. Then we had to get them ready for the next customer."
The fear that the shop would lose work when loan cars were dropped did not materialise.
"We just explained the problems of loan cars to our customers and they were very understanding," McPherson said. "We directed them to a rental car company where we'd arranged a discount deal -- but even that wasn't necessary after a while."
There is a halfway position too. Traralgon Accident Repair Centre in country Victoria runs six brightly-coloured courtesy cars for which it charges its customers $10 a day. Obviously that is a substantial saving on commercial hire but still defrays the cost to the shop.
One of the trade-offs that usually applies to loan cars is that they advertise the panel shop, and often some if its suppliers, in bright bold lettering. The higher up in prestige levels you go however, one panel shop owner said, the less customers want to be seen in a piece of mobile advertising. Add to this the probability that prestige owners can better afford to rent a car, or have a second car available, and the pressure eases for the prestige shops.
Insurance companies are very much aware of the loan car issue. Four years ago, NRMA Insurance was providing conditional loan cars as part of its cover. It went through the pain of abused cars on a massive scale. Then in 2000 it ran a survey among its policy holders asking them if they preferred hire cars being built into their premiums or separating them as an option -- and lowering the base premium. The result was a strong vote for the latter.
Currently, NRMA Insurance provides hire cars -- after a theft -- for all comprehensive motor vehicle insurance policyholders. The maximum is 14 days, or until the vehicle is recovered, or repaired, or until the insurer pays out on a total loss -- whichever is the shortest period of time.
Policy holders can also pay an additional premium and choose to have cover for a hire car after accidents. The policy confirms the maximum number of days (usually 14) and the maximum amount NRMA Insurance will pay per day. Generally, this is standard practice across all parent company IAG policies.
If asked for loan cars, repairers who do IAG work have the option of referring their customers to the insurance policy -- where the customer's choice has been virtually stated. But the The European experience
Courtesy cars have been a contentious issue now for some 10 years in Britain. Insurance companies have forced repairers to provide courtesy cars free of charge to insurance policy-holders in order to maintain their approved repairer relationships. Over this period there has been virtually no increase in the hourly rate or any other recognition of these and other ever-increasing costs, including parts shortages which tends to prolong the period of the loan vehicles, according to the UK trade group Vehicle Builders & Repairers Association (VBRA).
Repairer viability problems have also been recognised in mainland Europe where the Dutch Trade Association, FOCWA, is now alerting insurance companies to the fact that if recognition of these costs is not addressed then their members will take suitable action. In an earlier demonstration where Dutch repairers protested as a group, an agreed automatic charge was achieved for the disposal of hazardous waste.
Ron Nicholson, VBRA director-general, said: "Similar advice has been sent by the VBRA to repairers asking them to calculate and include these and other costs such as courtesy cars into their repair charges. Those who have heeded this are now benefiting from increased, safer margins and assisting in transparency for the market in understanding the true costs of repair.
"It is also interesting that the German Office of Fair Trading has determined that some insurers have been operating as a cartel, again a subject that the VBRA has been discussing with the UK OFT and is continuing to address."
The VBRA was quick to point out that if the Dutch repairers are finding it difficult to provide free courtesy cars within their £45.00 hourly labour rate, then it makes it impossible for UK repairers to sustain the FOC courtesy cars on only half this amount.