07 Oct Interest Margin: The Hidden Fleet Cost You Can’t See But Always Pay

While the management fee is at least visible, interest margin hides in plain sight within monthly rentals. It’s the profit margin leasing providers add to the base cost of funds when calculating lease charges. On paper, it looks negligible. In practice, it’s one of the most lucrative and least transparent revenue streams for suppliers.

Even small variations in this margin can lead to major cost implications, especially for larger fleets with thousands of vehicles under contract. Over time, these subtle adjustments become a consistent drain on your budget – often without procurement ever realising what’s happening.

Why It Matters

• Small shifts, big impact – Even a tiny increase in margin can add up to millions across a large fleet.
• Ongoing exposure – Unless fixed, suppliers can adjust margins on a new contract, often without detection.
• Lack of transparency – Many clients assume a low headline rate equals a low margin, but without validation, this is just an assumption.

The Risk for Procurement Leaders

Procurement often treats headline rates as the measure of competitiveness, but those rates can be misleading. Suppliers may use blended rates or obscure base costs, making it difficult to see the true margin applied. Without proper validation, procurement is left blind to one of the largest hidden costs in the contract.

What To Do Instead

• Fix the margin upfront – Lock in margins at contract award and ensure they are auditable.
• Validate the base rate – Benchmark against a recognised standard to ensure fairness.
• Audit consistently – Build forensic audits into your supplier relationship to verify compliance.

In effect, if you cannot measure the margin on money, you cannot control the true cost of your fleet. Suppliers rely on this opacity. Procurement must challenge it.

Learn how to bring visibility to interest margin and close five other hidden trapdoors in our ebook: Control the Contract, Control the Cost.

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