Loan vehicles: does running your own courtesy car pay

The cost side is uncomfortably clear: a loan vehicle costs money every day, including the days it sits on the yard. Insurance, road tax, depreciation and tires run on regardless of use. So it is not the purchase that decides the economics but the utilization.

And there are two points at which a loan vehicle can get expensive without anyone noticing beforehand: how the vehicle is classified for insurance and registration, and a handover without a record. On the first point the usual argument — that you are lending it free of charge — does not help. Both can be settled in advance, and both should be settled before the first customer drives off.

The benefit to the customer is obvious. What is more interesting is what changes in the garage as soon as the customer is not waiting for their vehicle:

• Standing time becomes acceptable. A part that only arrives tomorrow stops being a problem and becomes a scheduling question.
• Diagnosis gets time. Intermittent faults can be narrowed down more sensibly across two days than between ten and twelve.
• Utilization smooths out. Jobs no longer have to be pressed into a one-day window just because the customer wants to drive off in the evening.
• Consolidated ordering becomes possible. With a night in hand you order on the next regular run instead of paying for express delivery.

That is why the question is put wrongly when it is only whether customers expect one. Put properly it reads: how much capacity do you gain if vehicles may stay overnight — and what does that cost you.

Work with two blocks. Fixed costs arise regardless of use, variable ones only when the car is driven. What matters is the sum of the fixed costs divided by the number of days in service — that is the amount one day in service has to carry before the rest lands in your overheads.

The number that surprises most is rarely a cost item but the count of days in service. Before you buy a vehicle, keep a list for eight weeks: how often would a customer have needed one, and for how many days. Without that list the purchase is a guess.

Without a fleet of your own

There are intermediate steps with the same effect on capacity and considerably lower cost:

• A collection and delivery service solves the problem for customers who only need to get to work and back.
• An arrangement with a local car hire firm covers the peaks without a vehicle standing on your yard.
• A bicycle or scooter for town is more popular over short distances than you would think — and a completely different matter for insurance.

Anyone who regularly lets customers take a vehicle away has left ordinary company-car territory as far as insurance is concerned. Lead with the question rather than with any country's answer, because the answer differs and the question does not: under what category does your insurer and your registration authority treat a vehicle that is repeatedly handed to third parties to drive on their own responsibility?

Here sits the most widespread piece of trade folklore: that you lend the car free of charge, or at most at cost, and that this therefore is not hire. In several jurisdictions courts have rejected exactly that argument, and it is worth knowing why: what tends to decide the classification is that a vehicle is handed to outside drivers systematically and repeatedly for their own use. Whether money changes hands is frequently not the deciding factor. Do not assume your jurisdiction is the exception — ask.

The consequences do not wait for a claim, either. Cover is the most expensive item but far from the only one:

• Insurance cover is open to challenge when a claim arises, because the vehicle was out in a use the policy does not cover. Then it is not a premium difference at stake but the amount of the claim.
• Penalties from the registration authority, because the vehicle is registered for a use it does not in fact have.
• Complaints from competitors. The local hire firm meets the requirements and pays for them. Anyone getting around them gains an advantage that can be acted against — and the competitor notices, because you advertise it.
• Losing your trade plates, if the authority concludes the business is unreliable. That then also hits the journeys you genuinely need them for.

The clean route is not free either: in many places a vehicle in self-drive hire has to be tested annually rather than at the usual interval. That line belongs in the cost calculation above, before the vehicle is on the yard — not among the surprises of the second year.

So settle the question in writing before you buy, and at both places: with your insurer and with the registration authority, each time with a concrete description of how you intend to handle it. A verbal assurance on the phone will not help you afterwards, and the inquiry costs you nothing but the time to write it.

Three points belong in the same conversation:

• Who may drive — only the customer, or family members too. The circle of permitted drivers is in the insurance contract and has to appear in the handover record.
• The excess — how much, and who bears it if there is a claim. That belongs in the loan agreement, not in a chat while handing over the keys.
• Minimum age and license held for how long — some policies contain restrictions nobody knows about until they bite.

Trade plates are expressly not a solution for this purpose but the shortest route to the same consequences. They are tied to the business's own test, demonstration and delivery journeys; running a vehicle on them as a customer's everyday transport is not what they are for. What applies to your plates is a question for the registration authority — and that answer is cheaper than any of the consequences above.

A loan vehicle without a handover record produces the same arguments as booking a vehicle in without recording its condition — only with the roles reversed. The record is printed on one side and takes five minutes.

What goes on it:

• Vehicle, registration, mileage and fuel level at handover and at return.
• Existing damage, marked on a diagram or photographed — together with the customer.
• The agreed return date and what applies if it is exceeded.
• The fuel rule: out full, back full, is the only one nobody argues about.
• Who may drive, the excess, a mileage limit if there is one.
• What to do in an accident: call the police, admit nothing, tell you.
• A note that fines and penalties from the period of use fall on the driver — as the registered keeper, you get the post.
• Signatures at handover and at return.

Check the license without storing too much

Looking at the driving license before you hand over the key goes without saying. A note on the record — license produced, date, initials — documents the check and stores considerably less than a copy does. If you do want to copy it, settle beforehand what you are basing that on and how long you keep the document; in case of doubt, less is the better decision.

Three models are common, and they do not exclude one another.

If you do charge, the loan belongs on the invoice as its own named item — not as a silent uplift on the labor time. How it is treated for VAT is a question for your accountant, because it depends on whether it is provided for a fee and how it relates to the repair.

An accident claim is a case of its own

Where a third party is liable, the injured party is usually entitled to a hire car or, alternatively, to compensation for loss of use. The other side's insurer does not automatically reimburse whatever rate you set — vehicle class, duration and necessity get examined, and reductions are the rule rather than the exception. Agree the rate before the vehicle goes out, not when the settlement arrives.