Fleet News

Pick 'n' mix conundrum – curse of the well-run fleet

PICK a car, any car. Company car drivers are increasingly being given free rein when it comes to choosing their next vehicle.

In the interests of reducing red tape and increasing the perceived benefits of company cars, the vehicle choice list is becoming an endangered species in many sectors.

Instead, employees are simply blocked from opting for certain types of car (two-seaters, hot-rods, moonbuggies etc) and ordered to keep within a certain monthly spending limit.

This is of particular benefit to fleets using a leasing and fleet management company, as the extra headache of dealing with so many manufacturers is outsourced to an external supplier.

But for fleet managers, the decision on whether to allow employees to roam free in the wilderness of a completely open-badge policy or to restrict choice to just a handful of manufacturers is a difficult one.

On the one hand, for predominantly 'perk' fleets, a limited badge policy could breed discontent among staff because of the restricted choice.

Furthermore, for the mainly 'essential user' fleet, badge limitations could result in reduced flexibility in relation to individuals' personal tax liabilities.

But on the other hand, cost savings could outweigh such disadvantages and provide drivers with a quality vehicle within their choice band.

Ask the experts and they point out that the final decision is wholly dependent on a company's objectives for its fleet.

Ian Tilbrook, managing director of ING Car Lease, faces the pick and mix fleet conundrum every day and believes the only way to clear the fog of confusion surrounding some businesses is to clearly define key priorities.

He said that a fleet had to ask itself what was most important – safety issues, the environment, employee aspiration or cost.

Once the key issues had been identified, then the company could move on to make a decision.

If safety issues are key drivers, then clearly vehicles with a high crash test rating come first, while for environmental effect, those that are Euro IV compliant or use alternative fuels are preferable.

Tilbrook said: 'If environmental issues are uppermost, it is important to consider the life-cycle of the vehicle and technology developments.

'Look at whether the manufacturer has a clear strategy going forward or if it has launched a product that will no longer be at the 'cutting edge' in a few months.'

If an employer is focused on building a fleet that aims to tempt and retain staff through the provision of vehicles with a prestige badge and/or non-mainstream vehicles such as coupes and 4x4s, a limited badge policy – albeit the right badge – can standardise choice and potentially offer employees access to better specified vehicles due to extra discounts negotiated.

One of the biggest perceived benefits of concentrating choice on a few suppliers is improved buying power and reduced costs.

But, Tilbrook argues, it is important to view any discounts offered in two lights. First, discounts need to be measured and compared against the wholelife costs for vehicles in the same category.

This is best reflected through the rental, if a vehicle is leased, though the largest discount does not always equate to the lowest monthly rental.

Secondly, discounts need to be considered in relation to associated costs, such as the tax burden for the individual taxpayer.

Once a company has established its priorities, the pros and cons of restricting the badge can be easier to establish.

Tilbrook said: 'As a simple rule of thumb, the lower the number of manufacturers, the higher the likely discount offered. Other elements, including fleet size and change cycle also need to be taken into consideration.

'A family badge is always an option for some middle ground. Here, a number of manufacturers under the same group provide an element of choice, yet still enable economies of scale.'

Examples include Ford, which could also offer Volvo, Land Rover, Mazda and Jaguar in a single deal, or Vauxhall, which could also include Saab.

Tilbrook added: 'Restricting the badge can result in cost savings, enable simpler gradings, help companies to build relationships with manufacturers and offer choice. For those fleets with a van requirement, choosing the right manufacturer can also offer further bargaining power.'

However, production capacity can be an issue if the company decides to limit the badge – if there is a delay the entire fleet is affected.

It is also vital to check that the badge chosen has longevity and can keep up with changes.

For example, if a company had a single-badge supplier that was unable to provide Euro IV compliant diesels, which avoid the 3% benefit-in-kind (BIK) tax penalty, then drivers would rightly be angry and demand an alternative from the many manufacturers that can supply compliant models.

  • ING Car Lease is a wholly owned subsidiary of ING Group. Operating across nine European countries, it currently manages in excess of 100,000 vehicles, offering a wide range of funding and fleet management solutions.
    ING Car Lease employs 615 staff and operating turnover in the financial year 2001 exceeded E650 million. In the UK, ING Car Lease operates a fleet of 11,400 vehicles.

    The pros and cons of badge restriction

    Pros:

  • Cost savings
  • Simplified gradings
  • Strengthens relationships with manufacturer
  • Some choice – many manufacturers now offer a more diverse range
  • Fleets with LCVs may achieve more bargaining power

    Cons:

  • Reduce staff motivation and satisfaction
  • Limited life-cycle – will the badge keep up with changes in legislation
  • Risk to production capacity
  • Limited product range

    Six of the best prove the segment is alive

    THE segment may be shrinking, but it is still as alive as ever – if not more so because of the increased competition – in the upper-medium sector.

    The Peugeot 407 is about to make it even hotter.

    The firm is committed to selling huge numbers of this striking new vehicle into the fleet market and so will be looking for good running costs, strong residual values and predictable ownership.

    To do so, it will have to battle for room against some very high-quality competition from other firms with an equally firm foothold in fleet. We've pitched the strongest model in the 407 line-up, the 2.0 HDi 136 SE, against key fleet rivals and asked our panel of experts to assess the merits of all the cars and come up with a rating of one to six based on all the facts available. It is pitched against the two giants, the Ford Mondeo TDCi and the new Vauxhall Vectra CDTi.

    There's also the new Highline specification Volkswagen Passat TDI, the Fleet News award-winning Toyota Avensis D-4D and the Renault Laguna dCi.

  • Subscribe to Fleet News.
  • Get the news delivered to your desktop
  • Leave a comment for your chance to win £20 of John Lewis vouchers.

    Every issue of Fleet News the editor picks his favourite comment from the past two weeks – get involved for your chance to appear in print and win!

    Login to comment

    Comments

    No comments have been made yet.

    Compare costs of your company cars

    Looking to acquire new vehicles? Check how much they'll cost to run with our Car Running Cost calculator.

    What is your BIK car tax liability?

    The Fleet News car tax calculator lets you work out tax costs for both employer and employee