Fleet News

Replacement cycles: New year, old fleet?

Driver power influences replacement cycles

While most fleets seem set to retain extended replacement cycles, some are looking to shift policy back. Two key factors are influencing this reversal – driver power and cost concerns.

The influence of drivers over replacement cycles tends to vary according to which industry sector a fleet is operating in.

According to the Fleet200 Market Dynamics Report, a detailed analysis of Britain’s largest fleets by Fleet News’s sister company Sewells, drivers have most influence on fleet policy in perk-car heavy sectors, such as banking, accountancy and IT.

John Kelly, from GE Capital, says: “We have started to see some interesting trends.

"Most notably, HR departments are starting to gain traction for the earlier replacement of cars as a tool to aid the recruitment and retention of key staff.”

The second key factor – cost concerns – relates to accessing running cost savings obtained by shifting to more modern, efficient technology, a calculation that must be balanced against the additional investment required to obtain a new vehicle.

Kelly adds: “With rapidly improving engine and drivetrain technology, CO2 emissions are being driven down year-on-year and MPG performance is getting better.

Drivers therefore want to change cars more often to minimise both their benefit-in-kind tax liability and personal fuel bills. Lower CO2 and fuel bills are also good news for employers.”

Nick Jones, principal consultant at Lex Autolease, says: “As technology advances and fuel potentially becomes the most significant proportion of the wholelife running cost of the vehicle, then fleets might choose to flip the vehicles on a short cycle rotation.

This tipping point will depend on a number of factors such as availability of product, pricing of new ‘super-efficient’ models, discounts and the desire for these new technologies in the second-hand market.”

To extend or not to extend

The pros

  • Cheaper rentals/lower expenditure on replacements. Leasing savings can be worth several hundred pounds a year per car.
  • Image – customers might not appreciate what’s perceived to be a profligate approach to buying new cars at a time of austerity

The cons

  • Risk of higher SMR bills if cars are not looked after
  • Lower residual values
  • De-motivated staff
  • Slower to exploit advances in safety technology/fuel efficiency
  • Cost of MOT in fourth year
  • Car might fall out of manufacturer warranty in fourth year

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