Choosing the right leasing company can open the gates to a blissful relationship, but the wrong decision can lead to a miserable and costly experience. Andrew Ryan reports
Selecting the right leasing provider can have a dramatic effect on the efficient and effective operation of an organisation’s fleet.
Get it right and it can lead to a long, hassle-free agreement for both fleet decision-makers and their drivers, as well as reducing costs and future-proofing against changing trends.
Get it wrong, though, and it can lead to years of unnecessary additional costs, unsuitable vehicles, poor customer service and an awkward relationship with a supplier who cannot meet the needs of your organisation.
But there are steps a fleet decision-maker can take to ensure it enters into a fruitful agreement.
“It’s all about the preparation,” says Paul Holmes, director of fleet consultancy Fleet Managers’ Friend. “For me, the most important part of the process and when so many people get it wrong is at the outset.
“Do your homework, be clear about what you want, and when you start the agreement know what to expect en route and at the end.”
The first vital step a fleet decision-maker should take is to determine what they want from a leasing agreement and provider.
“Ensure you clearly define the purpose of the exercise,” says Caroline Sandall, director of ESE Consulting and deputy chairman of fleet operators’ association ACFO.
“What are you seeking to achieve? Better service? Cheaper cost? Consider what a successful outcome might look like.”
To do this, a fleet decision-maker should engage with other stakeholders in the organisation to ensure the tender meets current and future organisational needs.
This may include other services an organisation wants from its supplier, such as fleet and accident management.
“Working with your stakeholders is the most important thing as it helps get your requirements as accurate as you possibly can,” says Colin Hutt, category and contracts manager (fleet and insurance) at the CITB, which went through a leasing company tender process last year.
“That means you get a better response from suppliers, that they understand more about what you want, and it gives you the best chance to evaluate them properly and appoint the best company.”
He adds: “It helps to be as open and honest as you can and clear about what you want from this contract.”
Contract priorities can differ dependent on the size and type of fleet, its requirements and whether the organisation is in the public or private sector.
“The process has got to be relevant to the size of the operation, so if you had six vehicles, the probability is that someone in the office would ring round and get some quotations, that’s the reality,” says Holmes.
“If you have 25-plus, then that is where you start getting into some sort of mini-tendering exercise, so you say to the supplier ‘come in and talk to us about what you do’.
“When you get past the 100-vehicle mark is when you are getting into a meaty arrangement and invite six or seven people in.
“I wouldn’t go much further than that because you could get bogged down with the tender exercise and the cost of that would outweigh any savings.”
However large the exercise, the same best practice guidance applies when selecting which suppliers to contact.
“Consider whether that company can fulfil your requirements and provide the quality of service required,” says Sandall.
“Formal confirmation of capability should include obvious items like BVRLA (British Vehicle Rental and Leasing Association) accreditation, but also include some basic financial checks and industry checks – contact other fleets to discuss their services, via organisations like ACFO. You want to gauge their reputation.”
Holmes adds: “Go to networking events, talk to other users and say ‘you get your vehicles from such and such, what is the service like, what did they do?’ Recommendation is far stronger than any advertising or marketing campaign.”
The size of a leasing company alone should not overtly influence a decision. What is more important is that the potential suppliers have the capability, capacity and competence to deliver the services the fleet needs.
“Increasingly we are seeing requests for evidence of equality policies and other corporate social responsibility measures,” says John Webb, principal consultant at Lex Autolease. “This is all part of procurement leaders seeking to develop a sustainable supply chain.”
Public sector fleets can tender for leasing suppliers through procurement frameworks such as the Crown Commercial Service, where bids are sent to a number of pre-selected suppliers.
Fleets can either source their vehicles from a single leasing company or from a number of providers: each approach has its pros and cons.
“Without a shadow of a doubt, there are definitely good reasons for a business to go for a solus arrangement as much as there is for a fleet to go multibid,” says Jayne Pett, sales and marketing director at Fleet Operations.
“It just depends on what the company is looking for and looking to achieve, what its business model is and how it is structured.
“Clearly, with some larger fleets they can negotiate some very good terms on a solus arrangement that suits their business.
“Also when it comes to pan-European fleets it can be advantageous when you’ve got a leasing provider that covers many of the European countries as well so they can bring everything under one policy.”
However, she says the strategy of using multiple leasing companies is commonly used to drive down costs and limit rental creep.
For example, using dual or multi-supply enables a fleet to sense-check the funding quotes of one leasing company against another.
Multiple suppliers will also sometimes be used by organisations which have very specialist requirements which only a few leasing companies are able to manage.
Using multiple funders can increase administration for a fleet decision-maker as they will be receiving reports from a number of different companies instead of just one, as well as having several points of contact for their vehicles.
They can simplify this by using a fleet management company which will coordinate the contracts and provide a single source of contact to the leasing companies.
An agreement with a leasing company is not just for the present: most last for three years or more, so it is important to ensure it will be fit for purpose in the future, too.
Peter Eldridge, director at ICFM, says: “It is still key for fleet professionals to meet financial and operational requirements, but the ICFM believes these should now be considered as simply the ‘hygiene factor’.
“What fleet professionals need to focus on now is to have the right tools for the job in hand and that means looking to the future and being able to react to and set policies that bring into play more strategic considerations, covering a broader range of mobility solutions.
“Coupled with this is the need to have a firm grasp on the associated environmental, powertrain and compliance challenges that go hand-in-hand with this fast accelerating brave new world of transportation development.
“The supply chain is absolutely key to this development and high on the leasing company selection and suitability list should be the clear demonst-ration that they are providing real innovation and driving the changing face of the sector.
“In summary, it’s time to raise the bar and look to create a new and exciting template for leasing company selection and choice.”
Pett adds: “Most businesses will have a key idea of their vision, and I think vision is a good question to ask any leasing provider and also their strategy that fits around it.
“There is no point saying ‘today we are looking at this and that is how we are going to stay forever’. It is an ever-changing world with things like GDPR and WLTP, so a fleet decision-maker should consider what the future may hold and look at that when they are putting a leasing provider in place.”
Key questions should focus on operational delivery. Others should look at quality and reliability, speed and flexibility, value for money, strong service delivery and clear communication, and financial security.
Questions can be broken down into five categories: price, service, capability, references and user experience.
Price: Fleets should consider creating a representative basket of vehicles for quoting, breaking out the key elements of the rental/services – depreciation, cost of funds, maintenance and tyres, admin/management fees etc., so they can compare each area of spend across all suppliers.
They should also ask about rebates, end-of-contact profit sharing, mileage pooling etc. The fleet decision-maker should ask about all possible costs and fees and, if they have specific requirements such as high volume of vehicle reallocations, consider adding further templates to capture these costs for comparison between suppliers.
Questions around end-of-contract damage, how any damage waivers operate and what the leasing company’s track record is, can also be asked.
Service: Fleets should ask questions to challenge how the leasing company ensures consistently high levels of service – how does it target first call resolution? How does it manage call volume, staff incentives and training?
Capability: Fleet decision-makers should make sure they cover each area of the services to be provided – quotes and orders, dealer management, servicing and maintenance including tyres and breakdown, accident management, data and MI (management information) etc. They should ask challenging questions and avoid those that will result in a yes/no answer: they want the supplier to demonstrate there are controls, it ensures the driver is managed, it looks at the root cause etc.
References: Requesting references should be standard, but a fleet should always ask for lost clients as well as existing ones. It should take up those references and ask that organisation what issues they experienced, what they would change if they could, etc.
User experience: It is vital a fleet views the service from a driver’s perspective. How easy is it to quote? What information is made available to drivers? How will they support those who need to discuss their options? A fleet decision-maker should think about the end-to-end experience, from the first point of contact, through quote to order and delivery, service and maintenance, collisions and damage. Also ask what happens when things go wrong and how vehicles are managed at contract end.
Webb says: “Questions need to be clear and unambiguous so that meaningful evaluation can be made and there is genuine competition.”
When the tender document is developed, each question should be weighted to highlight their importance to the operation of the fleet.
“This makes it 100% clear when the suppliers are looking at the tender what they are supposed to do,” says Hutt.
“They can see how many percentage points that question is worth. If we are giving a total of 60% overall for this section of the tender and one question pops up as coming up at 10%, they think that ‘actually, I’d better make sure that this answer is really good because it is going to count a lot towards the total for this tender’.”
Many scoring matrices are available, says Sandall, but a structured approach should always be used, not only to ensure the end result is robust, but to also provide a framework to enable the fleet decision-maker to clearly differentiate between suppliers in a formal manner.
Overall, when scoring a tender response, questions relating to price should account for 25% to 40% of the total scorecard, adds Danielle Tilley, business development director of Venson Automotive Solutions.
“Anybody who scores more than 50% for price – unless it is a very simple commodity – is missing a trick and making price too important,” she says.
“The fact is that there are so many other things in supplier relationships that will be ignored by scoring price so highly. Equally, if the price is suspiciously low, ask why.
“In life you generally get what you pay for and that includes when tendering for fleet services.
"If a supplier can significantly undercut its competitors there is usually a very good reason for it, which is why it is vital to look at value for money and monitor contract performance against measurable standard.”
CITB usually has a panel of three or four people who evaluate the completed tender documents, They separately score the answers with comments about why they have awarded that mark.
They then meet and discuss the answers before agreeing on a consensus score for each question.
Shaun Sadlier, head of consultancy at Arval UK, adds: “Sometimes, when all the analysis has been finalised, it is worth asking a simple question. ‘Can I work with this company and its people?’
“If the answer is yes, then there is a very high likelihood of future success.”
Service level agreements (SLAs) should be introduced to monitor and measure the key elements of the services being delivered to a fleet.
“A well thought out and constructed SLA will, from the customer’s perspective, identify the limits of acceptable service and, for the supplier, will provide a continuous incentive to improve its performance,” says Sadlier.
“SLAs should be limited in number, clear and concise, measurable and achievable, and should include a definition of the service.
“I have experienced requests for SLAs that have run into the hundreds, something that is totally unmanageable and unusable by either party.
“There should, instead, be a small number of key measurements that can be considered by both fleet and leasing company.
“Also, when both parties feel confident that a measurement is consistently achieved, they should delete it from the list and add another.
“In this way, the SLA can clearly be a fluid tool for both parties to achieve high satisfaction.”
A fleet decision-maker should also have a structured plan for meetings with its supplier.
This may involve a monthly review of management information and performance, a weekly operational call to deal with any issues or trends, plus a more formal in-depth annual review where they can also agree the strategy for the forthcoming year.
“Benchmarking should be a part of the contract, but there are limits to what can be done outside a competitive tender situation,” says Sandall.
“You will want to gain some comfort that your charges are competitive, but this is not straightforward to measure on an ongoing basis.”