Imagine for a moment running a car and van fleet of 693 vehicles, all of which are on spot hire.
Drivers booking the benchmark car, a Vauxhall Astra or Ford Focus, might end up with a Kia Ceed because that was the only model available at the time.
Or they might get an Audi A3. One might get a brand new car; another a two-year-old model.
Picture the heated arguments with the fleet department and line managers over badge image, quality and BIK payments, particularly when the unwanted car is being kept for up to three years. A recipe for disaster?
That was the situation Paul Boulds walked into when he was appointed head of transport and fleet at Daniel Contractors two years ago.
A former fleet manager in the army, Boulds was used to dealing in efficiency and squeezing the most from available resource; the need to satisfy drivers was not on the agenda.
At Daniel, however, he encountered a different proposition.
“Staff were not happy; the policy was not seen to be fair to all employees,” he says.
“We had staff in the same grades but with very different cars and very different BIKs. We have Fords, Vauxhalls, Audis, Kias, Renaults, Seats – we have no control over what cars we get sent.”
So why spot hire at all? “Most of the cars came with our acquisition of Land and Marine,” Bould explains.
“Also, two years ago spot hire was very cheap – we could get a Vauxhall Vectra for £40 per week. Now it’s more expensive so contract hire is more attractive.”
With the financial arguments fading fast, Daniel is going through a complete policy change by switching its cars to contract hire.
It is also introducing a new standardised grading system based on the Ford Focus and Mondeo, in three trim levels.
They will all be 1.6-litre diesel Econetics with stop-start technology. With the Focus offering CO2 of 109g/km and the Mondeo 114g/km, Daniel’s average CO2 will drop significantly from its current 160g/km.
“The reason is to control CO2 and reduce cost – contract hire is around £29 cheaper per car than we are paying now on spot hire and we will save around 100 tonnes of carbon,” says Boulds.
And the benefits will be immediate, as all 150 job-need cars move from spot hire to lease over the next few weeks.
Boulds will also be able to better control the policy; previously everything went through the company’s hire desk.
The cars will be run over three years/90,000 miles; the only option employees will have will be the colour.
The decision to go for Ford was on the basis of wholelife costs combined with the quality of the car, reliability, fuel efficiency and boot size to accommodate equipment.
And the Econetic policy dovetails with Daniel’s environmental aspirations.
Daniel founder and board member George Daniel explains the reasons behind the company’s focus on environmental initiatives.
“We are in a competitive world so our vehicles have to be efficient,” he says. “We compete on price so we have to save money to win business. But we also have to act in a green way.”
The new funding policy followed a fleet audit by Expense Reduction Analysis (ERA). It took a look at potential savings and recommended the move to contract hire.
It also recommended the Econetics approach and helped Daniel to negotiate added extras such as floor mats.
Arval was duly appointed on a full maintenance agreement because it “had the best package for our needs”, says Boulds.
A profit share agreement on disposal with Arval removes some of the risk in the event of early termination.
“We are vulnerable in year one because of the way the system works, but in year two or three we could make money if cars go back,” Boulds says.
“It’s a new mindset for us and has required new internal processes on reallocation and ordering. It’s all about engaging HR to be ahead on new starters and leavers so we don’t have under-utilised cars.”
He has also opened the scheme to the company’s 95 cash takers. So far, half-a-dozen are looking at coming into the programme.
The switch to 1.6-litre diesels will enable Daniel to cut fuel spend by an estimated £52,000 a year.
The majority of its spot hire cars were 2.0-litre which meant an AFR of 15p per mile; now it is 12ppm.
Boulds has analysed the impact on staff by measuring actual fuel consumption rather than the manufacturer’s official figure.