Profits fuelled by clever charges
Ten days ago, I flew to Cape Town to deliver a talk to clients, providing feedback on my recent trip to the Berkshire Hathaway shareholders' meeting.
As is the customary on business trips, I collected a rented car from a well-known car hire firm at Cape Town International Airport, and drove to the venue at the Mount Nelson Hotel. After spending the night at the hotel, I caught an early flight back to Johannesburg.
Like many other corporations, our firm has entered into a commercial arrangement with the car hire group to cater for our business travel needs, and I would assume we receive favourable treatment in return. Over and above lower rates, the deal also means we avoid long queues at the kiosks and having to spend time signing next to the hundreds of scribbled crosses on those lengthy forms. We merely hand in a voucher at the fast-track desk and obtain a set of keys and directions to the vehicle from usually polite and well-trained staff.
The final bill is e-mailed directly to our accounts department, but as a courtesy a copy is sent to the driver as well. I seldom bother checking the details, but out of curiosity decided to examine my latest invoice.
The basic tariff for the hire of the vehicle was fair enough, but it was all the fiddly extras included in the invoice - all of which were out of our control - that caught my attention. Admittedly, I was not involved in signing the co-operation agreement between our two groups and therefore cannot be certain the additional charges that appeared on the statement were not clearly identified and explained during the discussions.
Added to the main lease charge of R308 were a documentation fee of R55, petrol of R82 and a surcharge for collecting the car at the airport of R22. The bill came to R466 - the extra levies making up more than 50% of the central hire cost.
Of course these are all clever marketing ploys applied by a number of enterprises to lift operating margins without the full knowledge and understanding of the customer. Paper trails are vital for any business to maintain proper books and records, but I hardly believe preparing an invoice is an expense a client should carry, even if there are minor taxes associated with the validation of each "agreement". Obviously, the longer you retain the vehicle, the lower the expense. But I would imagine the majority of the group's patrons are business people on short contracts that extend for no more than a day or two.
Why fine me for collecting the car at the airport? What was my alternative? Catch a cab to town? It's an indefensible ruse, but nothing compared with the R82 that I was levied to refill the tank.
My journey to and from the Mount Nelson Hotel was a little more than 40km, nearly all of which was driven on a traffic-free, three- lane carriageway. When I returned the vehicle to the lot at Cape Town International, the petrol gauge had barely moved. I have no problem paying for fuel I consumed - as long as it was fairly measured - but applying a disproportionate cost is iniquitous.
I have no beef with the nameless firm - they have a bigger bank balance and a stronger legal reach than I. The speed of their service and the quality of their vehicles has always impressed me. Nor are they alone in the practice of adding a string of contentious charges that obfuscate the underlying contract.
Certain banks and finance companies are notorious for misleading borrowers by assuring bargain rates, only to load agreements with raising fees, attorney's costs and other admin charges that counterbalance the benefit.
Nor is it new. How can I forget the saleslady from Grolier who knocked on my door more than 40 years ago, shortly after my wife and I were married, and promised that in celebration of the happy occasion she would offer us a free set of encyclopaedias. There were no catches, she guaranteed, other than we agree to pay a small monthly admin charge to ensure the continued existence of the local office. Right.
I'm having difficulty deciding whether these practices are clever or cunning and whether reflecting a more accurate version of the true underlying cost of the service would necessarily deter potential customers. Are businesspeople really that gullible? Or is it a smart understanding of the detachment between the consumers and their accounts departments?
Anyway, I'm off to Durban on Thursday and will be renting another vehicle from the same hire company. This time, though, I will carry a can of fuel in the boot and be sure to top up the tank in the parking lot of King Shaka Airport before I catch the flight back to Oliver Tambo - no more R20 a litre for me.