CASE STUDIES

Environment Agency

The Environment Agency has traditionally contract hired its company cars and outright purchased its commercial vehicles but in the past few months it has begun considering additional options.

For a small number of vehicles, long-term rental has proved the best value for money.

“We have a simple model that starts with utilisation and works backwards to match against wholelife costing to see which is the best funding method,” explains Mark Ford-Powell, business manager at the Environment Agency.

Long-term rental has proved effective for projects that run for one to two years.

Although this approach is “in its infancy” Ford-Powell does not envisage any extra administration or problems with management information.

If there are, he will work with the provider.

 

AstraZeneca

An Employee Car Ownership (ECO) scheme works for AstraZeneca’s 1,100 company car drivers.

Fleet manager Judith Popay says it gives wider choice and lower costs, although the disadvantage is the scheme’s complexity.

The company switched to ECO following the merger of Astra and Zeneca.

“Astra and Zeneca had different car schemes and entitlements so we needed something flexible that could work across all drivers without disadvantaging either group,” Popay says.

“An expensive fleet and punitive personal tax regime meant ECO was the best solution.

“On average drivers were £35 a month better off or they got a better car.”

The decision to switch took six months. It was put forward by purchasing and finance. HR backed the idea and it went to the main board for approval.

Presentations were made to every driver along with an individual comparison to demonstrate the financial position and choice options.

Whitechapel administered the scheme, with GE continuing to provide fleet management.

The scheme is funded through outright purchase as AstraZeneca is cash-rich.

Popay says: “Why borrow when internal cash is cheaper?”

 

Sense

Outright purchase has proved the most cost-effective funding method for Sense’s fleet of 240 vehicles.

Around 12 years ago the charity tried contract hire with maintenance due to the preferential tax position.

It proved “disastrous”, according to fleet manager David Kaye, after the company was hit with damage charges when the vehicles were returned.

“Some of our clients sometimes exhibit challenging behaviour which can impact on the condition of the vehicles,” Kaye explains.

Vehicles may also be driven by up to six people per week and Kaye acknowledges that it can be difficult when drivers switch from a small car to a minibus, although all drivers undertake minibus training.

“Small bumps and scrapes are an inevitable part of the job,” he says, adding that it would not be appropriate to charge drivers as “they are not professional drivers, they are carers”.

Outright purchase allows Sense to keep vehicles for up to eight years.

By that point the vehicles have fully depreciated and any money at auction is invested back into the charity.

Kaye takes a view after four or five years on whether to sell or not based on vehicle mileage, use and maintenance costs.

The vehicles are generally low mileage (10,000-15,000 miles per year on average).

Last year Kaye undertook a cost comparison of outright purchase versus funding, taking quotes from a number of leasing companies.

“Our current costs were actually half the amount it would cost us to lease,” he says.

The cost savings are the same for cars, people carriers and minibuses.

“Because we’re a charity, cost saving is everything,” Kaye says.