Fleet News

Writing's on the wall for 'hastily conceived' car ownership plans

RATHER than looking for that elusive, all-encompassing solution, companies should become far more strategic when examining their vehicle operations and save money by adopting more efficient fleet funding policies.

Employee car ownership schemes can take some of the associated risks of offering a company car, such as corporate liability, away from the fleet manager.

But Tony Donnelly, managing director at Goodwood Fleet Management, believes the increased administration and costs of implementing such a scheme can sometimes prove to be more of a burden for the fleet manager.

He said: 'With the country crying foul as company car and fuel tax changes make their vehicles much more of an economic consideration, we have seen a flurry of hastily- conceived alternatives designed so that employer and employee can come out top.'

Donnelly believes that, despite the number of car ownership schemes, more are being dropped because they are 'too complex and administratively cumbersome to run'.

He said: 'The entire car ownership solution is about to fall flat on its face as most of the providers are reluctant to underwrite the company's car drivers without the umbrella of a corporate guarantee. When all this comes home to roost at the next review in 2005, parachutes will be seen as the accountants dive for cover. This is hardly surprising, as they are not fleet management practitioners, merely opportunists who have found a 'tax loophole' and are exploiting it for short-term gain.'

Donnelly also warns of the costs associated with car ownership schemes. He said fleet executives needed to be aware of approved mileage allowance payments (AMAP) and legislation under the Consumer Credit Act that can affect the costs associated with company car schemes.

He added: 'Car ownership schemes rely heavily on the AMAP reimbursement rates to make the plan look good to the driver. The balance is tipped in the driver's favour as long as his or her business mileage is substantial, but this scheme was designed to deter heavy business mileage. When the drivers' circumstances change, such as in the case of a promotion or house move, the balance can quickly tip the other way and leave them seriously out of pocket.

'Adopting a scheme can be very costly for a business with a high attrition rate because all of the agreements are written within the Consumer Credit Act to ensure title transfers to the driver on commencement. Should the driver terminate his or her employment, the majority of schemes will not allow the agreement to transfer to another driver – it has to be terminated, with all of the attendant costs.'

Fleets need to take advantage of the opportunities already available within the industry, optimising vehicle choice, changes in legislation and training, rather than looking for new alternatives to improve business, according to Donnelly.

He said: 'The fact is, when tax changes took effect, rather than looking for an alternative, the opportunity existed, and still does, for companies to become far more strategic about their vehicle needs and selections.

'In fact, it is an opportunity to save vast sums of money. Instead, many businesses are still searching for the elusive, all-encompassing solution. The Government is also failing in its objectives. Taking the view that changing legislation away from a mileage-based scheme to an emissions-based scheme would result in most company car drivers downsizing doesn't seem to hold much credence when you consider that BMW and Mercedes-Benz have enjoyed excellent trading since the introduction of the CO2 regime.

'One aspect of all this that I find particularly concerning is that despite forthcoming legislation on corporate manslaughter and an industry now openly concerned at the number of poorly-trained fleet managers, companies still seem intent on trying to avoid their responsibilities rather than embracing them.'

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