Fleet News

Fleet funding: Multi-method funding – the ups and downs

The upside

Employee needs and vehicles used vary from fleet to fleet and things can change on a day-to-day basis. Demands from financial departments, human resources and at board level can also affect how much capital is available and which is the most suitable choice at a given time.

Richard Schooling, commercial director at Alphabet (GB), believes that by using several methods fleets can cover the needs of all parties.

He said: ‘The principal benefit of using multiple funding options is that you can select the most appropriate form of funding for different sets of vehicles or drivers depending on your (and their) key criteria, such as cost, choice and tax liability. No single form of funding works out best for all drivers on all counts.’

By adopting a flexible approach fleet managers can react quickly to changes in the market and take advantage of offers from dealers and manufacturers which are often only available for a limited time.

It also enables fleets to take advantage of interest rate changes. Operating just one funding method may mean losing out on changes to rates and inevitably cost savings.

Andrew Cope, chief executive at Zenith Vehicle Contracts, said: ‘There is no doubt that for most fleets a multi-funding option is the most cost-effective approach, simply because a typical fleet includes a wide range of vehicles by cost and type coupled with often very different mileage profiles.’

The downside

A KEY consideration for using several funding methods is the increased administration it can bring. Using solely outright purchase, for example, would require one management system and generates minimal back office work.

Steve Pinchen, product development manager at Hitachi Capital Vehicle Solutions, explains: ‘On the downside multiple acquisition choices mean increased internal administration of the fleet as maintenance and disposal risk requires management and more time taken on supplier relationships. It can also make reporting more complicated and requires additional accounting treatment to cater for vehicles both on and off balance sheet.’

Although administration can become cumbersome, fleets can outsource to a management or leasing company which will deal with the administration, several suppliers will be able to offer different funding means from their portfolio of products.

However, before opting for a funding method, fleets need to ensure that any supplier, whether alone or as part of a wider group, will deliver a first-class service.

Nigel Fletcher, deputy managing director at ALD Automotive, said: ‘Fleets need to be confident that their suppliers can meet all their needs, whether that be managing their owned fleet of executive vehicles, contract hiring their service engineers cars, or having a structured PCP scheme in place for the majority of users.

‘Companies’ needs and requirements change and, in line with this, so should the recommendations and service offerings from their suppliers.’

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