What are key items that should be included in a car policy?

In simple terms, fleet policy may be viewed as determining who is eligible for a company vehicle and the vehicles they can choose from. In practice, however, the fleet policy should comprise a more comprehensive statement of how the fleet operates. This will include details on:

• Eligibility criteria
• Contract duration and mileage
• Car choice
• Driver use agreement
• Maintenance provisions
• Accident damage reporting procedures
• Replacement vehicle policies
• Emergency roadside assistance
• Fuel policy
• Return of lease car at end (or before end) of contract
• Tyre/glass maintenance and repairs
• Insurance matters
• Responsible departments and relevant contact person/details
• And so on

In essence, the fleet policy documents all aspects of the company vehicle lifecycle: ordering, taking delivery, day-to-day matters and handing back the vehicle at the end of the contract.

How should a fleet manager decide which vehicles should be available for selection?

In the case of commercial vehicles, the process of vehicle selection is totally concerned with the role of the vehicle and ensuring it is fit for purpose.

With a company car, vehicle selection is driven by the perceived benefit as well as the business need and fleet managers would normally start by understanding what their competitors are offering. This can be done by compiling a specific industry benchmark with their leasing provider or procuring benchmark information.

Once they have determined the industry norm, they would try to set a benchmark list that is competitive in the market and delivers the correct mix of vehicles. This is normally done by selecting a range of “benchmark vehicles” that would be suitable at each grade.

The final decision is then to select one vehicle per grade from the list.

However, this benchmarking exercise is only one element in determining a suitable vehicle selection and allocation policy. There seems little doubt that for fleet operators in the years to come, cost control and emissions reduction will continue to be inextricably linked and remain central to the running of most fleets.

At LeasePlan we believe the key to this goal of greener car policies and improved cost control is to take a wholelife cost view of vehicles, which I will discuss later.

Is it a good idea to allow an element of vehicle choice within the fleet policy?

Our customer feedback suggests that tight economic circumstances have presented an ‘open door’ for those wishing to restrict choice, reduce fuel and other fleet running costs, and increase their purchasing leverage by introducing single or dual badge deals.

In the economic climate of the past two years, many employees have simply been glad to keep their jobs and have therefore been less likely to object to a perceived restriction in their benefits package.

Perhaps we will see a similar resetting of the benchmark when it comes to ‘user-chooser’ company car schemes, with choice far more restricted in terms of make, model and emissions.

Or perhaps in time, economic recovery will again promote greater competition for staff and a return to broader company car choice. It is likely that the speed and nature of economic recovery will probably dictate here.

Ultimately, the amount of vehicle choice available to employees will be determined by a number of factors appertaining to the particular profile, focus and culture of the organisation concerned.

Therefore, wise fleet managers are asking their fleet/leasing provider for help when selecting the best vehicles and amount of choice for their fleet; making sure they incorporate manufacturer terms and all operational cost drivers that will affect the overall expenditure of the vehicle(s) chosen.

There may be circumstances where a fixed list of cars is sensible. In deciding how much choice to offer, three key factors need to be considered:

• By only offering a fixed list of vehicles, the employer would be in a stronger position to negotiate improved manufacturer support (volume-related bonus)
• By limiting choice it becomes far easier and more cost-effective to re-allocate vehicles if employees resign or are transferred internally
• By limiting choice, the employer will be able to dictate and control carbon efficiency and overall operational costs more effectively

For a number of organisations, from an ‘employee benefit’ perspective, it is desirable if employees feel they do have an element of choice in their company vehicle.

However, this choice needs to be carefully controlled as it could end up costing the employer far more money than if they had limited the selection.

Therefore, in determining the scope of vehicle selection it is important to take into account the wholelife costs of particular vehicles. If this approach is not adopted, and purely lease or acquisition cost is used as the determining factor, this will give an incomplete and distorted view of the overall cost of providing employees with vehicles.

What are wholelife costs?

The concept of wholelife costs has been discussed in the fleet sector for many years now. The definition once included just depreciation and finance costs, maintenance costs and possibly insurance costs, but now needs to be reconsidered on as much of a holistic basis as possible.

Every conceivable cost incurred by a vehicle over the period of usage should be examined and analysed in order to assess the true cost to the business and ensure optimal vehicle choices and contract terms: ie funding, maintenance, servicing, fuel, insurance, accident management, tyres, glass and general administration.

Equally tax considerations; you should include all of the relevant taxes from both the employee’s and employer’s perspective. The choice of vehicle funding method will affect the tax cost of each vehicle to the company, and this should be factored in too.

This analysis should be carried out at a vehicle-by-vehicle level, enabling decisions on choice and allocation to be made in full knowledge of the true cost to the business over the contract duration.

Equally, a view of the wholelife costs associated with the entire fleet of the organisation can be very revealing and useful to gain an understanding and to focus activity for the management and reduction of costs.

Should a fleet manager think about putting some low carbon emissions vehicles on the fleet, or is it still early days for these?

If consumer behaviour is emblematic of employee attitudes, company car drivers will almost certainly stimulate a demand for cleaner and greener vehicles.

This is consistent with both the motivation to reduce personal carbon footprints and – perhaps more pragmatically – the wish to reduce benefit-in-kind taxes, private fuel costs, and even emission-based residential parking or congestion charges for those based in major towns and cities.

As a new generation of managers comes to the fore over the next decade, it is perhaps likely that this attitude will wane and that individuals within organisations will be more uniformly motivated by the green agenda, especially as social conventions, trends and notions of status change.

For an early pointer towards this, it is only necessary to look at the growth in the number of celebrities striving for green status, with Hollywood actors queuing up to be photographed behind the wheel of a Toyota Prius!