Fleet News

Fleet funding: Don’t put your eggs in one basket

THE past few years have brought a gradual shift of opinion about methods of funding for fleet managers.

Fleet managers have steadily been altering the way they purchase their fleets, with a continuing shift away from a single funding method to a multi-funding policy with several means such as outright purchase and contract hire working side-by-side.

Technology has had some bearing on the shift as it is now much easier for fleet managers to compare rates and services online.

Peter Cooke, professor of automotive industries management at Nottingham Business School, explained: ‘A large number of fleets now use several methods of funding as it can be more cost-effective. Sometimes two or three contract hire companies can be used by one company.’

He added: ‘It used to be more common to just have one funding provider as it was simpler but things have changed because of the sophistication of management systems and the fact that it is now much easier to check rates electronically.’

Fleets are now aware that flexibility is key and are viewing funding methods as a collective group rather than looking at each one as an individual option, according to Simon Leitch, national sales manager for the Whitechapel corporate division of Lloyds TSB autolease.

‘In the past, different methods of fleet funding have been treated as standalone policies during the fleet procurement process, and only viewed collectively during analysis of the pros and cons of each policy,’ he said.

There has also been a shift with more fleet managers now considering policies which fit the company rather than what the rest of the industry is doing. Rich Green, UK managing director at GE Commercial Finance Fleet Services, believes that a multi-method fleet funding policy is now becoming the norm.

He said: ‘Historically, the majority of fleets have tended to have an all-or-nothing approach. If a decision were made to change from contract hire to an employee car ownership scheme, the whole fleet would usually be affected.

‘However, what we are seeing more and more is a move to a blend of solutions.’

Using a multi-method approach is possible only if fleets have the resources and administrative back-up to support it. However the funding supplier should be able to manage additional administration and ease the workload for the fleet manager.

There is no way a 1,000-vehicle fleet can be compared with a small five vehicle operation so funding methods will obviously differ according to the needs of the fleet. It is the responsibility of the fleet manager to decide which method suits the company the best.

Steve Pinchen, product development manager at Hitachi Capital Vehicle Solutions, said: ‘Each method has its own pros and cons with many factors contributing to the decision.

‘It would be unwise to advocate a ‘one size fits all’ policy as there are distinct advantages to keeping leasing and purchasing options open.’

External factors such as changes to legislation, increasing fuel prices and duty of care can all affect which funding method to choose.

Fleets will need to assess the current situation, looking at the company’s stance on issues such as residual values, maintenance costs, revenue needs and tax before coming to a decision.

Gordon Calder-Jones, head of ECO scheme Alto and major corporate sales at Masterlease, said: ‘There is no prescriptive solution as every fleet is different. That’s why it is important to start with a full analysis of the fleet needs, including health and safety, mileage rates and the importance of the vehicle as a benefit to employees.

‘The right scheme can be tailored using a mix of funding methods so it is both cost-effective and an attractive benefit to all.’

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