Fleet News

New tricks for old fleet dogs

SUGGEST to some of Britain's hard-nosed van fleet operators that they are wasting money and they won't believe you, although it is probably true. John Charles discovers that by 'thinking out of the box' when selecting and paying for vans, a great deal of cash can be saved. It is a fact that many van fleet operators are penny-pinchers extraordinaire. When it comes to shelling out cash, they are notoriously reticent – hence the curious situation in Britain where all heavy panel vans (Ford Transit apart) are currently supplied in standard format without a driver's airbag. Van buyers, the manufacturers say, simply don't want to pay even for this basic safety device.

So if you suggested to one of these operators that he is wasting money on his fleet budget, he would probably tell you in no uncertain terms where to park your opinions.

Furthermore, if you told him that the wastage was being made in such fundamental areas as choice of vehicle and funding options, he just wouldn't believe you.

The problem arises because not only is the average van fleet operator a tightwad, but he is also hidebound – reluctant in the extreme to accept new ideas and innovations.

If, for example, his firm had operated Ford Transits for the past 30 years, that firm is likely to go on doing so, whether Transit is the right choice or not.

At the same time, said operator will continue to buy his vehicles outright, ignoring the wealth of new leasing options on offer which could provide cheaper alternatives.

Van leasing is a growing industry but there are still a large number of operators who don't understand the benefits, according to Richard Egan, managing director of Hitachi Capital Commercial Vehicle Services, one of the industry's leading players.

Egan explained: 'End-users who do not see a value in leasing vehicles tend to want to run those vehicles into the ground. That van is also going to break down and they have got to maintain it. What they have left is a pile of rusty metal and a risk on the residual value. Larger companies recognise the importance of not having a large amount of money tied up in “dead” assets.

'It's up to us to get the message across and demonstrate it can be cost-effective. Customers need to take into account the time lost through purchasing, servicing, raising finance, interest on the money they have tied up in vehicles and disposing of them. How could the customer have invested that cash more effectively for their business rather than in a fleet of vans? Companies should ask – if they had £250,000, what would they really like to do with that money? With our advice, they often find they can downsize on vehicles too, making considerable savings.'

For those thinking about trying leasing for the first time, it is worth pointing out that all leasing companies are NOT the same. While some act as little more than a money-lending facility, others offer what almost amounts to a free fleet management service.

Egan said: 'Some leasing companies are basically banks. They are only interested in financing a fleet of vehicles – they may not always want to help you solve a problem. We offer impartial advice on how to use vehicles and save money.'

The process of saving cash starts immediately a company calls Hitachi with a request. If a customer wants to order, say, a fleet of 50 Renaults Masters, some leasing firms will simply supply the vehicles and collect the rental payments at the end of each month.

Egan said: 'We know from experience that sometimes operators of vehicles ask us to give them prices for contract hire/ leasing of vehicles, based on assumptions they have made which other companies haven't challenged.

'The first question we ask is: ''what do you want to do with this vehicle?'' Our aim is to help the customer specify the vehicle so we arrive at the best solution and help them deliver their own service.

'If they need Transits for fitters who want to sling a toolbox in the back – of the 100 vans they need, perhaps only 40 drivers really need a Transit.

One good example is a client which specialises in fitting security doors, many of which are large and have to be fitted within specified opening hours. The company needed big vans to transport the doors. After discussions with us, they realised they needed to create two teams – one to deliver the doors and the second to fit them. As the second team only had to carry tool boxes, they could manage with much smaller vehicles.

'Essentially, it is about working differently with different types of vehicles.'

Much of the misunderstanding of leasing by operators comes from the fact that they believe as the leasing firm has to make a profit, it can't possibly do the job as well as the individual. But this thinking is flawed, according to Egan.

He said: 'Leasing companies, due to economies of scale, have greater purchasing power and can make big savings – not only in terms of acquisition of vehicles but also in their service and maintenance. This is our job, which we do every day so it stands to reason we will be better and quicker at it – saving time and money.'

Hitachi also has experience of which particular vans perform well in the reliability stakes, so can also save customers cash by choosing vehicles which will last longer without the need for expensive repairs.

'We have some vans which do 250,000 miles in a lifetime and never cause a problem. We have others which do 100,000 miles and start getting gearbox and engine problems, etc. We had a fleet of 30 old model Transit 190s that did up to 300,000 miles and never missed a beat.'

End-of-contract wear and tear charges are one of the big fears of some operators and indeed have caused untold problems in the car leasing field. But most leasing firms will not charge a van owner for small amounts of damage as they understand that commercial vehicles are workhorses which are bound to pick up the odd scratch or two along the way.

Egan said: 'Some leasing companies do understand that a van is a tool. It is not like leasing a car which is expected to be in showroom condition. Vans are for carrying goods. Their wear and tear will be worse than cars. Some are better than others, ie vans which allow you to replace caps on the ends of bumpers rather than the whole bumper. Or, for some vans, the back of a wing mirror can cost £20 while for others you have to take the whole wing off to replace the mirror.

'It's part of our role to alert customers to these differences.

'It's important to find a provider of contract hire which understands the difference between vans and cars. Ask the contract hire company if they agree that a van is a tool to do a job rather than a car which is just transport for an individual.

'Of course wear and tear will occur. A £1,000 bill of repairs done on a van is not going to make that van worth an extra £1,000 at sale. We work with customers to minimise the cost. If the van is worth £3,000 at the end of its contract and needs £1,000 worth of repairs, we know we won't end up with a van worth £4,000. Equally though, a van needing £1,000 worth of repairs is not necessarily devalued by £1,000.'

Finally, a top-notch leasing firm can also save customers cash by accurately predicting what residual values will be at the end of the vans' contract – a minefield bearing in mind how many different lengths, heights, engine variants and added options are available.

On assessing values, Egan said: 'The assessor has to ask if a particular specification of vehicle is of value once it is finished with. If you have specialist knowledge of the market place you know where you can sell the vehicle afterwards.

'That can mean you can put a higher residual value on a vehicle because you know how to target it afterwards as a used vehicle.'

How to choose the right leasing company

  • Go armed with questions to help you find out if they understand commercial vehicles. Their first question to you should be: 'What are you using these vehicles for?'
  • Your questions to them: 'Do you operate trucks?' If they do, there's a far greater chance they will understand vans. 'How do you approach wear and tear?' 'Do your sales people view vans differently to cars?'

    Southern Water cashes in on leasing expertise

    SOUTHERN Water is one of the fleets which uses the expertise of Hitachi Capital Commercial Vehicle Services to help run its fleet operation in the most efficient manner.

    Kevin Shepherd, transport manager, Southern Water, said: 'It's important to work with a leasing company that understands your contract and what you need from it. We need fast response times – and an understanding of the vehicles and what we need them to do.'

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