Fleet is the second largest expenditure after staff in most organisations, but how do you obtain best value?
The biggest fleet show in the UK, Fleet Management Live, takes place on 19 and 20 October at the Birmingham NEC. It’s free to attend and will be packed with more than 100 exhibitors. Plus there are eight best practice sessions covering many aspects of the fleet industry. Visitors will be able to meet key suppliers and question the experts on everything from the future of company cars to practical advice for meeting your fleet’s needs.
Finance professionals are welcome, and special seminars will be held in the Fleet Insight Theatre to cater for all levels of experience across all sizes of business.
Cost savings are invariably an agenda-topping item for finance directors and managers so it is critical fleet policies are designed and operated as efficiently and effectively as possible.
David Rawlings, director BCF Wessex Consultants, will say company cars remain one of the most sought after benefits by employees despite rising levels of benefit-in-kind (BIK) taxation, but employers and drivers must place the focus on value rather than cost.
While the seemingly year-on-year percentage increases in BIK tax look ‘horrible’, in cash terms, company cars still deliver great value, Rawlings will explain. Thus, businesses must focus on that and the opportunities they deliver – notably as a tool to motivate employees.
Although contract hire and outright purchase remain the two most popular vehicle funding mechanisms, other options include: hire purchase, lease purchase, contract purchase, finance lease and operating lease.
There is no one-size-fits-all answer with different solutions applying, dependent on the situation of the individual business including its culture and attitude to financial risk.
What’s more, running a fleet of cars can have major tax implications for businesses – notably: its corporation tax position, VAT situation, cash flow, the rate of return on capital employed and corporate balance sheet implications.
Having determined that company cars have a business role to play and settled on a financial strategy, smart employers will use wholelife costs to determine company car choice.
That’s because in terms of vehicle selection and best practice they provide the best forward estimate of the real costs to an organisation, in delivering business mileage, over a replacement cycle. Furthermore, using wholelife cost data identifies the best value company cars and thus enables employers to invariably offer more attractive vehicles to their staff.
However, industry evidence suggests hundreds, possibly thousands, of businesses are potentially wasting money because they are failing to use wholelife costs as the basis for company car selection.
Rawlings will also highlight the recent government consultations on future changes to company car BIK tax for ultra-low emission vehicles and salary sacrifice schemes.
Jo Hammonds, group asset manager, Mears Group, has many years’ hands-on experience of managing the company’s fleet, which comprises many thousands of cars and vans.
Wholelife cost is one of the key factors Hammonds uses when deciding which company cars and vans to include on the Mears nationwide fleet. He will explain why the vehicle with the lowest price may not necessarily be the most cost-effective for a business to operate from a wholelife cost perspective.
He will also explain how vehicle operating cycles influence wholelife costs and that there comes a ‘tipping point’ when maintenance costs overtake residual value and extending replacement cycles prove unviable.
Finally, with no industry definition of what data goes into the wholelife cost mix, Hammonds will highlight the components he takes into account when comparing models ahead of deciding which to include on the company fleet.
The finance sessions will take place at the Fleet Insight Theatre on Wednesday 19 October (2pm-3.30pm) and Thursday 20 October (10am-11.30am).