Fleet News

Guest opinion: snags to sharing buying benefits

EMPLOYERS offering affinity schemes to bring the buying power of the business to employees must be careful, warns Ernst & Young's Alastair Kendrick.

'I have been involved in assisting a number of clients who have been looking at introducing an affinity car scheme and first it is worth ensuring that we understand what my view is of an affinity car scheme.

This is a car scheme which is available to all employees, irrespective of whether they qualify for a company car or not. It often sits as part of the flexible benefits package being offered by the company.

Some people who are entitled to a company car will take cash as an alternative and use the affinity scheme while other employees who are not eligible for a company car will simply use part of their salary to purchase the vehicle, given the attractive rates that can be provided.

It has been, in my experience, difficult to find interest from a number of leasing companies in providing an affinity car scheme. Generally, when leasing companies are offering employee car ownership schemes there is an agreement between the employer and leasing company underwriting the employee's finance.

In the affinity environment most employers will not wish to underwrite finance and this causes a problem for a number of the leasing companies who are reluctant to take the risk. This seems particularly the case with bank-owned leasing companies. Smaller leasing companies that have individual arrangements with loan companies seem to be able to get round the difficulty.

The problem is further aggravated by the fact that most employers will want the repayments collected by direct debit. This is also a less secure method of funding for the leasing company.

In an employee car ownership scheme such deductions are generally collected by salary deduction. We have also found extreme difficulty in obtaining discounts from manufacturers for affinity schemes.

While a number of leasing companies have offered their existing levels of discount to an affinity schemes, we understand from discussions with manufacturers that this is not appropriate as those levels are only specifically available for company car drivers. Manufacturers have been extremely nervous about providing any discounts to affinity arrangements on the basis that it is undermining their network of dealerships, who would normally serve these drivers at retail prices.

In my experience, it takes a considerable amount of time and effort to convince manufacturers to take part in an affinity arrangement and it generally occurs that when one manufacturer agrees to take part, the others then follow suit.

A number of manufacturers have suggested this is a matter they are reviewing but it is now some time since such statements have been made and we do not appear any further forward to any clear resolution by many of the main car makers. It is important in structuring such affinity arrangements that the cost of the vehicle is cheaper than, say, a car supermarket.

In my view, this is the test of success as employees will simply want to know how much they can buy a car per month in comparison to what they are being quoted by their employer.

As a majority of the drivers enjoying the affinity car scheme will be non-company car drivers then such contracts do not always come with maintenance and breakdown cover, as this will be optional, and there is also the fact that it will not be an insured car.

This gives opportunities for leasing companies to sell these as additional items to the employees.

Again, there has been reluctance on the part of a number of leasing companies to be involved in this arrangement.

With the growth of interest in flexible benefits, it is obvious that this is an area that employers will be looking more at over the next few years. It will be helpful if both fleet providers and manufacturers could consider carefully what their position is going to be and to make sure that they have a core product to sell in the marketplace.'

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