Fleet operators have been warned that “doing nothing” in the face of legislation and taxation changes will lead to increased costs and “noise” from drivers.
Craig McNaughton, corporate director of Lex Autolease, told delegates at the ACFO spring seminar that the car fleet sector is experiencing change “on a scale and at a pace that few, if any, have seen before”.
“What is causing fleet operators the greatest angst is that there is no set solution today because the WLTP (Worldwide harmonised Light vehicle Test Procedure) measurement impact is still unknown,” McNaughton said. “It’s going to remain difficult to interpret; it changes on an ongoing basis.”
He suggested that it could be 18 to 24 months or “even longer” before choices become clear. As a result, Lex Autolease has seen a “significant” number of customers delay ordering new vehicles and extend lease terms to “try and buy themselves some time to work out what the impact of these changes is”.
Together with competitors, Lex Autolease is lobbying Government to “come up with a sensible decision” on company car tax when it starts using WLTP-derived CO2 figures from April 2020.
“We think further (tax) increases through WLTP would be unfair on what is a highly taxed population already,” McNaughton said.
He pointed out that the percentage used to calculate employee benefit-in-kind (BIK) taxation has already increased from 10% to 26% over the past decade.
However, should lobbying Government prove unsuccessful and if fleet operators choose to “do nothing and remain in a 90% diesel policy” then “the cost will increase and so will that noise from drivers”, McNaughton said.
He told delegates at the ACFO seminar it was essential for employers to start to review their company car policies and that even those who were sceptical about electric vehicles due to cost, infrastructure or range would need to consider them because “they are the future”.
“Our view is that a restricted, single fuel-only policy will have to change and that some blended fuel solutions are needed,” he said. “That will include looking at RDE2 diesel vehicles, when available, so you can take advantage of the drop in diesel BIK of up to 4%,” he added.
“Plug-in hybrids will still remain part of it, provided there is a sensible and suitable fuel policy to mitigate some of the potential expense increases that come with it.
“Pure electric vehicles will have a place as they start to phase in, provided we’ve taken some of the pre-qualifying analysis to understand it’s suitable for the job, and ultra-low petrol vehicles that perform well under the new WLTP testing. So that blended consideration will be important.”
He also advised companies to consider a solution to support grey fleet management, particularly as they often involve older vehicles and are therefore more likely to be affected by the implementation of clean air zones (CAZs) in cities than company cars.
“Based on our customers’ data the average age of a cash-taker’s car is eight years old and, if they’re using that car to travel on business, who is going to subsidise the toxicity charges that will undoubtedly come their way? I’m pretty sure the employees are going to expect to claim that back through expenses,” McNaughton said.
He added: “Telematics can be key to understanding what the potential impact of CAZs are and data is going to be absolutely key in creating travel strategies for employers.”
He advised businesses to use their suppliers to help guide them through the “minefield of regulation” and to help plan, adapt and accommodate changes.
Suppliers can also help fleet operators to benchmark themselves against leading operators in the sector and find new ways to reduce their fleet costs.
“We see benchmarking as allowing customers to be competitive both from an operational and from a reward perspective,” McNaughton said. “Retaining and recruiting the best staff through attracting a competitive rewards strategy is essential in these challenging times especially as we move into the post-Brexit arena.”