Motiva Group has joined forces with accounting giant Deloitte to persuade fleet managers see beyond rental value bands.
The Staffordshire FN50 fleet solutions business believes the contract hire sector has to convince fleet managers – and their employers – to look at whole-life costs rather than headline monthly bills.
Only then, says Motiva, can the contract hire industry deliver truly significant savings to managers under pressure from directors to demonstrate value and improve cost efficiencies.
Peter Davenport, chief executive at Motiva, said: “It’s amazing how many firms don’t even consider something as vital as fuel consumption when they are making decisions around their fleet policies.
“In fact the actual cost variables for both employer and employee are much more involved than most people realise.
“The rules around Corporation Tax, changing emissions regulations, the need to be seen to be green and the desire to make staff feel valued by offering a choice of vehicles all lead to a complex decision-making process.
“For example, how many fleet managers take into consideration the impact of CO2 on a company’s ability to offset its rentals against Corporation Tax which can affect the whole-life cost of the contract?”
Fleet News reported last year how car manufacturers desperate to maintain market share were introducing price instability with volume promotions and incentives for dealers to pre-register vehicles.
Motiva says this, combined with fleet budgets being squeezed from board level, was encouraging managers to give more credence to one-off “spot” deals that may look good at first glance – but which may end up costing the customer thousands of pounds more over the length of a contract.
Now Motiva has invested in Deloitte’s fleet and car tax analysis system – a tool that allows almost every financial variable to be taken into account, including rental costs, all known and future tax legislative changes, inflation, insurance, depreciation and the weighted average cost of capital (WACC) rates.
Pilot projects with existing customers have highlighted potential savings for both employer and employee running to tens of thousands of pounds.
Martin Franks, business development manager at Motiva, said: “We are extremely excited about this development.
“Time after time it has shown that choosing a vehicle based purely on its rental band can be an expensive mistake – costing both employers and employees thousands of pounds per vehicle over the course of a contract.
“It shows that some vehicles at the lower end of a band are actually significantly more costly over the life of a contract than some vehicles in the upper end of the band – or even those in a higher band altogether.”
Motiva is using the system as a free consultancy and internal audit tool for existing and potential customers.
Variables taken into account include Corporation Tax, VAT recovery rate, tax payment schedules, scheduled tax changes, year-end dates, depreciation, maintenance costs, vehicle CO2 emissions, insurance and fuel costs.
The system also produces reports showing the impact of vehicle choice on employees – taking into account factors such as National Insurance, Benefit in Kind, Income Tax, and personal and private fuel allowances.
Franks said: “Being able to talk knowledgeably to finance directors about WACC Rates and Net Present Values is a real advantage for fleet managers in terms of career progression and for the companies they work for in purely financial and control terms.”
The Deloitte system means fleet managers can view results by any of the variables, including whole life costs, make, model, emissions and P11D value.
Franks added: “This is a really exciting development for us. Until now, only the very largest contract hire companies have been able to offer this service.
“We can now bring those benefits to fleets of any size. If you’ve got a 50-vehicle fleet and we can identify savings of £500 per vehicle per year, it’s really significant - and those are exactly the sort of savings we can now deliver.”