Fleet News

Fleet funding: Secrets of a hassle-free fleet policy

Leading industry expert Colin Tourick has launched the second edition of his book ‘Managing Your Company Cars’. In the first of a regular series, we look at some of the key highlights that identify best practice for fleet managers, starting with fleet policy

DEFINING A FLEET POLICY

FIRSTLY, let’s define fleet policy. In its narrowest sense, ‘fleet policy’ means the list of vehicles you give to your staff from which they can choose their company vehicle. However, it also has a wider meaning. In its broadest sense, it means everything that your company defines as your standard way of running your car fleet.

This includes the vehicles you select, whether you allow users to choose their vehicles, whether they are allowed to contribute extra (‘trade up’) to get a better car, your policies for dealing with driver safety, advice you give drivers on the safe use of their vehicles, what happens if a driver returns a vehicle and it is found to have been damaged and so on.

Another way of expressing this is the ‘company car policy’. Generally I will use the wider definition as it is more appropriate, reminding us all that there is much more to running a fleet than just deciding what vehicles should be selected.

Every vehicle your company uses should be fit for the tasks it will be required to do. In some industries it is tempting to offer sports cars or performance cars to young graduates, in order to recruit the best talent.

Fleet managers have learned the hard way to resist this temptation as inexperienced drivers and high performance cars are a dangerous mixture.

You will need to consider the type of fuel, number of doors and whether the vehicle transmission needs to be manual or automatic. Some companies allow employees to select optional extras.

Some extras will enhance resale values while others will not. For example, leather seating will enhance value in high-value cars but not on basic models.

Alloy wheels can cost more to buy and to run. If they are in good condition they will enhance the resale value, but if damaged they can cause the resale value to fall by hundreds of pounds.

The vehicles you select should reflect your company’s image and the industry in which you operate.

If you sell luxury goods to the landed gentry, arriving in a small basic fleet car may not project the right image. If your company’s image is ‘green’, your fleet should reflect this.

Having considered the most appropriate vehicles for the job, you will also have to set an allocation policy – deciding who gets what.

Most organisations allocate vehicles according to staff grade. However, in recent years many companies have offered their employees more flexibility to choose vehicles that reflect their private as well as their business needs.

Flexibility is good for staff motivation and morale, but if you offer too much flexibility the costs can begin to rise.

A good approach is to select a benchmark car for each group of drivers and build the list from there, using wholelife costs rather than list price.

In this age of sex equality, it is important to remember to allocate cars without discriminating between men and women. In 2003 a group of women successfully won a case at industrial tribunal where their male colleagues were allocated better cars than they were allowed under the company’s car scheme.

If used cars are allocated, the policy should specify how long they will be kept. You can publish a fixed list that sets out all of the vehicles available for each grade of driver, or you can allow drivers to choose their own cars. It gives you certainty and control.

Fewer anomalies will arise and your staff will easily understand the system but vehicle costs change frequently and the list will need to change too. You will need to decide how often to make this change. If you do so infrequently, the business bears the price rises but you cannot remove them from the list until the next review date.

If you change the list frequently, a vehicle available to a group of drivers last month may suddenly be unavailable to them this month, so fixed lists can to be poor for employee morale.

The alternative to the fixed list is the user-chooser strategy. Allowing drivers to select cars up to the value of the contract hire rental or a particular benchmark car has the advantage that the rental automatically reflects purchase discounts, depreciation and interest costs, though it excludes insurance and fuel costs. Wholelife costs are another alternative. If you decide to base your fleet allocation policy on whole-life cost you will need to assemble whole-life cost data.

DEALING WITH DRIVERS

IT is good fleet management practice to put a driver handbook or instruction card into each car with clear directions on issues likely to arise when the car is on the road. This can be a condensed version of the instructions set out in the company car policy.

The driver handbook should include information on what to do in the event of an accident or breakdown, where to get the vehicle serviced, where to obtain tyres, brakes and exhausts, what to do in the event of glass breakage, what to do if a new tax disc or MoT certificate has not arrived by the due date and what to do if a rental car is required.

In all cases, the names and phone numbers of the contracted suppliers should be included.

It is also important to have a policy on vehicle damage.

Research shows that 25% of companies do nothing if the driver returns a car in unacceptable condition, 40% recharge the cost of restitution to the driver, 40% recharge the cost to the cost centre and 30% take disciplinary action against the driver. These add up to more than 100% because some companies take more than one of these actions.

A reasonable policy might be to advice your drivers that they must look after their company vehicles and that they will be penalised for not keeping them in a satisfactory condition.

A copy of the British Vehicle Rental and Leasing Association Fair Wear and Tear Guide could be useful.

Make it clear that failure to maintain the vehicle in proper order may lead to disciplinary action – this needs to be backed up by very clear wording in the employee’s contract.

POLICY TIPS FOR REDUCING COSTS

  • Stop providing free private fuel
  • Make sure cars are serviced regularly to ensure fuel efficiency and identify vehicle problems before they become expensive to repair
  • Use demonstrator cars where available
  • Consider taking cars on daily hire rather than using employees’ cars and paying them a mileage allowance
  • If you have a contract hire agreement, ensure the early termination clause in the agreement is as good as you can negotiate – and try to redeploy rather vehicles rather than terminate contracts
  • If you have a large fleet, consider taking third party motor insurance and self-insuring the comprehensive risk
  • Use journey-planning tools

    The article here is an abridged version from ‘Managing Your Company Cars’, published by Eyelevel Books in association with DaimlerChrysler Services Fleet Management. It can be bought online from www.tourick.com. Readers can get a £5 discount by entering Promotion Code 8705

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