Fleet News

BVRLA hits back at claim

THE British Vehicle Rental and Leasing Association has defended itself against claims that it is failing to do enough to promote the benefits of the company car.

Nick Brown, managing director of leasing firm Black-i has spoken out this week, calling for the industry organisation to be more vocal in its defence of employer provided vehicles.

He said: 'The BVRLA should do more to promote the merits of the company car, especially to company car drivers. The organisation should perhaps allocate a very much higher marketing and promotional budget for this purpose before it is too late.'

But the association rebuffed the comments, arguing its vocal support for the benefits of leasing was in itself a defence of the company car.

A spokesman said: 'The number of company cars acquired through contract hire has been growing steadily over a number of years and it is still increasing. We also have a lot of anecdotal evidence of drivers who have opted out moving back into company cars. In our support of the leasing market, we are indirectly supporting the company car. We also show how efficient it can be compared to a privately-owned vehicle.'

What Brown said:

'The company car is under threat as never before with more and more companies looking to introduce cash-for-car alternatives and so-called structured employee car schemes.

At first glance, sales figures look extremely buoyant for all three sectors of the new car market – private buyers, fleet (cars sold to operators with 25 or more vehicles) and business (cars sold to small businesses operating one to 24 vehicles) – with private and business sales at record highs last year and fleet sales just short of their 1998 record.

However, look below the headline figures and an alarming trend appears to be setting in with private car sales significantly increasing their share of the market in the last 18 months, largely at the expense of the fleet sector as opposed to business car sales. In fact, fleet's share of the annual new car market has been declining since 1996 when it reached 47.1%.

Last year's fleet sales accounted for just 41.9% of the market and in the first seven months of this year the sector's share is lower at 41.8%. Meanwhile, private sector sales have rocketed from a low of 44.8% in 2000 to 49.3% last year a figure repeated in the first half of 2002.

The company car, historically one of Britain's favourite employee benefits, is under threat. The threat has been creeping up on the industry for many months and now it is starting to take a grip like a terminal disease and no-one is promoting a cure.

As a consequence, I believe the British Vehicle Rental and Leasing Association should do more to promote the merits of the company car, especially to company car drivers. The organisation should perhaps allocate a very much higher marketing and promotional budget for this purpose before it is too late.

Statistics can be used to paint many a different picture but the inexorable rise of private sales to a record level last year coincides with three fundamental issues:

  • The 'Rip-off Britain' row over new car prices that culminated in a Competition Commission investigation. Its report, published in 2000, resulted in manufacturers, under Government pressure, cutting new car prices by approximately 10%. That led to the end of a showroom boycott by private buyers and sales subsequently rocketed.
  • In the last 18 months to two years, we have seen a gradual rise in the introduction by employers of cash-for-car schemes, personal car leasing schemes and employee car ownership schemes.
  • Low interest rates throughout this period have helped make funding vehicles easier.

    A recent survey by consultant Watson Wyatt reported that 57% of employers were now offering company car drivers the choice between a car or cash allowance, compared to 46% in 2000 and 38% in 1998. The survey also suggested that a fifth of eligible company car drivers were taking the cash option.

    Cash alternatives and employee car schemes have been promoted by benefit consultants and some leasing companies as a boon to employers and employees alike, largely because company car tax liability is not applicable. But they represent a dangerous trend for companies and their staff and to the very future of the fleet industry.

    The new carbon dioxide emissions-based benefit-in-kind tax system introduced in April has been perceived by bosses as particularly penal towards themselves as they tend to drive gas-guzzling company cars.

    As a result they have seen cash-for-car and other such schemes as more beneficial to them.

    I believe this lopsided view has coloured the judgement of top management. In introducing company car alternative schemes across the board for themselves and their staff, they have axed a benefit and replaced it with something which will be significantly more costly in the long term.

    Employees are being offered cash sums which may seem attractive – but in many cases they are not – leaving employees, particularly in small and medium-sized companies, out in the cold as employers look to reduce costs by paying staff as little as possible.

    In addition, employers are throwing away control of the cars that staff drive which could impact on company image and increase staff downtime in the event of vehicles being off the road.

    Separately to this, with the police and Health and Safety Executive promising to investigate employers' risk management policies following an at-work road accident, the threat of prosecution and large fines or jail looms large for bosses. The fact that an employee was driving his or her own car on business is no defence.

    Meanwhile, for vehicle funders and leasing companies promoting individual ownership of cars, there is a huge knock-on effect on their own staff and administrative costs which are bound to be passed on to end users. How can these companies deal with hundreds of individuals when they have been used to undertaking business with one fleet decision-maker per company?

    At the moment the biggest winners – and perhaps ultimately the only winners – are the benefit consultants and accountants who are queuing up to encourage employees out of the company car and charging plenty for doing so.

    Setting up a fleet policy has historically involved a company's fleet manager, finance director and possibly HR director. The establishing of company car alternatives involves a myriad of departments and individuals making the introduction of such schemes complex and time consuming.

    Companies should also consider how long the Inland Revenue is prepared to keep a watching brief on the introduction of some structured employee car schemes which see transference of the ownership of the car to an individual. The loss of too much company car tax could spark a crackdown by the taxman.'

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