The traditional concept of a company car is being challenged because of the flexibility offered by mini lease or short-term rental.
Pamela Halliday, sales director at White Clarke Automotive Solutions (WCAS), claims that leasing a vehicle for three or four years could become rarer for many drivers eligible for a company car.
“There is an increasing move towards short to medium-term rental vehicles by company car drivers, in particular those who receive a cash allowance,” she said.
“The availability of a mini lease or short-term rental – 12 months or under – represents both flexibility and value for money; a chance to refresh your car on a more regular basis with newer models.”
While short-term leases can often attract a premium of 20-25% over traditional contract hire, people appear willing to pay for the flexibility of changing brands and not paying early termination fees. They can also pay for a vehicle only when they need it, rather than every month.
The trend towards short-term rentals was identified by Fleet News a couple of years ago, explained by uncertainty created by economic worries.
However, what some believed would be a short-term blip appears to be turning into a longer-term trend, particularly as an alternative to pool cars and grey fleet.
Peter Cooke, professor of automotive management at the University of Buckingham, offered a blunt assessment: “Giving people a company car is a waste of time.
“The vast majority of company car journeys are relatively short and relatively infrequent, and we simply cannot afford this sort of luxury anymore.”
The growth of short-term hire and car clubs is improving options for those looking for an alternative to leasing. Cooke says companies are already subscribing to them and are saving money.
Surrey County Council reports a 26% reduction on cost per mile after linking with Streetcar. Its staff now must use the car club rather than their own cars for work purposes, removing the costly AMAP rates on fuel reimbursement.
Meanwhile, construction consultant Arup joined a car club and slashed the cost of pool cars from £17,000 to £5,000 in the first year.
Short-term rental schemes are being tested in a number of cities in Europe, North America and East Asia,
BMW and rental company Sixt have developed a car-sharing model in Munich, Germany. DriveNow launched in April 2011, has also now been extended to Berlin.
BMWi Ventures, a BMW sub-brand, allows users to find the BMW models via the internet, a smartphone app or at the roadside – no advance booking is needed. The service is expected to come to the UK.
One area that WCAS specialises in is helping with the utilisation of vehicles held in the dealer network for rental, demonstration, courtesy or replacement.
“This includes the development and deployment of bespoke IT systems to operate, and manage, national networks,” said Halliday.
It is here where Halliday believes the dealer network could tap into a growing trend of short-term rental.
“There has definitely been a move towards renting these types of vehicles from a dealer as opposed to traditional rental companies. This could change the dynamics of dealerships and increase footfall and the types of products they offer,” she said.
“Manufacturers recognise that there is an opportunity to increase profit and reward dealers for increasing vehicle utilisation and working smarter to get their brand out on the road and increasing awareness.
“Reservations and reporting have been the obstacles; we make entry into this untapped area very simple.”
Business eyes growth under new name
Nexus Business Solutions was recently rebranded as White Clarke Automotive Solutions (WCAS) after being bought by White Clarke Group in April 2010 – a purchase which made it one of the largest providers of fleet services to the global automotive industry.
Nexus was established in 1999 by Peter Blease – now chairman of WCAS – with the aim of providing automotive manufacturers, their dealers, commercial customers and leasing and rental companies, with consultancy, management services and IT systems.
Outlining its strategy for the next 12 months, Halliday said: “We aim to work with our existing relationships and to grow product lines with them.
“We also want to secure new business opportunities and help our customers drive vehicle registrations and increase penetration. Each customer will have their own priorities, we are small enough and flexible enough to be able to adapt to their requirements.”