Looking beyond the initial costs of investing in a fleet, how much will it cost to keep your cars road ready?
There is much more to the cost of a vehicle than the simple acquisition price or lease rate, and this is where some clever fleet management and spending a bit of time scrutinising the figures can pay dividends, because the cheapest cars to buy or lease may not be the ones that work out cheaper overall. A car that’s a little more expensive at the front end but much more efficient will incur reduced penalties in terms of benefit-in-kind tax for the driver, and National Insurance, fuel use and Vehicle Excise Duty for the company. The basic rule that the most efficient model is best is a good place to start with running costs, although that has to be balanced against the initial purchase price to make sure the long-term benefits outweigh the short-term gain.
Costs that need to be factored in start with a vehicle’s residual value – the amount that will be retained when the car is sold on. Fuel, insurance and National Insurance are three areas that even the most basic of whole-life cost investigation needs to take into account. Other areas to consider, depending on how detailed an analysis is deemed necessary and worthwhile, include the cost of finance to buy the vehicle in the first place, service, maintenance and repair costs.
Choice of fuel was previously a
foregone conclusion, because diesel
is the most CO2 efficient option and
the tax regime rewards CO2
efficiency, so the company car
market has gradually migrated
across to the black pump.
But, like many things in the fleet industry, that viewpoint is now shifting thanks to a combination of considerations. Firstly, automotive manufacturers have ploughed a lot of investment into a new breed of low-capacity turbocharged engines, so units offer the fuel economy of a smaller engine with the power of a larger one.
This, combined with the seemingly settled differential of at least 8p per litre cheaper for unleaded means that for lower mileage drivers, petrol rather than diesel is usually the intelligent choice.
There also seems to be an imbalance
between the attention paid to
choosing and acquiring a car, and
managing the so-called in-life costs
of that vehicle. That’s especially true
among smaller businesses that don’t
have a dedicated fleet manager and
where the responsibility instead falls
on procurement, finance or even HR
The attitude seems to be a presumption that once a vehicle is on fleet, its costs are largely fixed. But with service, maintenance and repair in particular, that’s far from the case. For starters, and despite common belief, there’s no requirement to have new cars serviced at a franchised dealer, as long as the independent specialist is accredited to manufacturer standards and uses the same quality of replacement parts. And franchised dealers seem to be waking up to the threat from independents, now introducing service charters, packages and nationwide fixed-price servicing aimed at improving the offering for companies and their drivers. Collect and deliver services are also becoming more commonplace, so the car can be looked after while the driver is at work and returned before they are ready to head home.
But downtime is also a major consideration. If a main dealer can turn a repair around a couple of days quicker than an independent, or vice versa, then the cost compared with the inconvenience of having that worker off the road needs to be factored in, especially if a hire car is required in the intervening period.