Why sale and leaseback works best for Tesco

Improved management of drivers has gone hand-in-hand with improved vehicle engineering.

The company buys the chassis cab and sends it to a body builder to install the box unit and fridge-freezer.

These are then financed via sale and leaseback, typically over a five-year term.

According to Dino Papas, this approach works best for the company.

It also owns a handful of vans outright and has a few on contract hire to enable it to compare funding methods.

“Sale and leaseback is most often the best solution for us. It allows us to run vans for what we consider the optimal time and we are appointed sales agent at the end of the deal,” he says.

“It also helps avoid ‘surprises’ around things like post-hire dilapidation charges.”

Tesco Dotcom has no plans to change its replacement cycle. “Any less than five years and the lower running costs and greater residuals don’t make up for the repayment costs,” Papas says.

“Beyond five years, wear and tear costs are simply too great.”

The company does have various other pilot vehicle finanace schemes. For example, a body swap programme with Northgate enables it to buy new chassis and switch an existing box across.

“It’s costly to do in some ways, but there is much potential for upside too,” Papas adds.

The Dotcom business is sharing best practice learnings and purchasing resource with Tesco’s distribution operation, including understanding ‘O’ licences.

Its new fleet of 25 Iveco CNG EcoDailys, which will run on Compressed Biomethane, are its first vans above 3.5-tonnes which require ‘O’ licences for the first time.

CDA debriefs cut fuel bill

The Microlise telematics system provides a vast array of data, all of which is assessed with CDAs in a de-brief after their shift.

Each debrief takes three to four minutes and covers the following:

• Driving in the ‘sweet spot’ – between 1,200-2,500 revs – for
• optimum fuel efficiency
• Fuel consumption
• Planned distance travelled versus actual mileage
• Driving time
• Drops on time: missed/early/late
• Drops in order
• Harsh braking – number of instances
• Idling time at the customer’s home
• Idling time en route
• Depot idling
• Speeding instances

Fuel consumption varies depending on route and, of course, driving style.

But because it is being monitored, average consumption has improved by around 10% in the two years since the de-briefs were introduced.

Given Tesco Dotcom’s overall fuel bill, this is a significant saving.