Fleet operators need to look beyond the current headlines – depressing though these are – to maximise their chances of long-term survival in these challenging times.
Pro-active fleet management to contain or reduce costs is essential amid the economic turmoil, according to experienced fleet consultant Stewart Whyte, managing director of Hampshire-based independent consultancy Fleet Audits Ltd.
Key action areas, says Mr Whyte are:
- Fuel budget management
- Reviewing allocation policies
- Examining all aspects of the fleet funding arrangements, ahead of the April 2009 changes in corporation tax rules
The consultancy has already revised its range of services to meet rising demand for independent expert advice amid the economic turmoil.
While continuing to offer full strategic and policy-level audits, Fleet Audits now offers a ‘Fleet Health Check’ and has also provided ‘Fleet Master-classes’ to groups of senior management in several existing clients, providing a full perspective on current market conditions, recent and forthcoming tax changes, and operating options.
Mr Whyte said: “Of course these are difficult times for many fleets, but it is not the first time that both demand and supply sides of the fleet industry have had to face up to recession. Despite the gloomy headlines, the fact is that most businesses will survive the current downturn, as we saw in the recessions of 1973/5, 1979/81, 1990/92 and the ‘dot.com’ boom/bust. Most companies will continue to trade, but the current climate provides the opportunity for most fleet operations to become ‘leaner and cleaner’ and thus save money.
“The important thing is that most businesses can significantly contain or reduce fleet costs by quite simple actions – and that must increase the chances of the core business surviving intact.”
The large increases in petrol and diesel pump prices across the earlier part of the year, the 2008 and 2009 increases in Vehicle Excise Duty for many fleet models, the sharp falls in residual values of most classes, hardened insurance and claims costs – all put additional pressure on employers, on top of the earlier factors of Duty of Care/ Corporate Manslaughter and Corporate Homicide Act and many other issues.
But these circumstances give businesses the best opportunity for many years to rein in fleet costs and revitalise their policies to meet current and future demands, according to Mr Whyte.
“While there are all these significant pressures, many companies have the foresight to realise that the current conditions provide the basis for constructive changes to fleet policies and arrangements,” he said.
The major concern should be winning back control of the fuel budget through better recording and reporting of fuel use.
Mr Whyte said: “This is the ideal time to review the fleet allocation policy to identify more appropriate cars and vans, to reduce fleet fuel consumption and CO2 emissions – which must continue to be a business priority. Cleaner, greener models will reduce fuel costs and whole life costs as against many ‘user-chooser’ favourites, through lower road tax levels and much better residual values. This will be true for both leased and owned fleets.”
One major concern for the whole industry is that far too few fleet operators have yet latched on to the changes – effective April 2009 – in the corporation tax regime. This is likely to increase most pre-tax costs – but paradoxically may reduce the after-tax costs of some of the expensive and larger, thirstier models.
“The pattern of ‘winners and losers’ is not obvious” remarked Mr Whyte. “This is a situation where every single model has to be examined for the impact of the changes. Employers who do not review their policies could well find the depreciation and funding elements of their fleet costs increase by up to 15% as a direct result of these changes, whether they leased or buy. These changes will also impact on many public sector fleets.”
However, Mr Whyte warned that the policy of simply offering cash options to employees on the basis of allowing them to continue to run their own cars was almost certainly flawed.
The clear underlying message is that the cost of running a larger/ high-emitting car is going to increase, irrespective of who owns it. Increasing Vehicle Excise Duty rates will apply to the car whether it’s a company car or employee-owned. Similarly, low residual values will apply to big, thirsty models because used-car buyers will be unable to accept the high road tax or fuel costs.
“It is pretty clear that employees who continue to demand larger cars will cost employers more and more either directly as company cars or funded through some form of cash allowance or alternative scheme,” warned Mr Whyte. “No-one can make these market-place costs disappear - although well-run fleet operations and leasing companies probably have a better chance of controlling them than the individual employee.
“This is actually a good time for most organisations to look closely at their fleet strategy. The current employment market makes this easier than in boom times - and there are some very good deals to be done in the generally weak market. All the options are open and need to be explored constructively, with many more businesses finding that if done properly and positively, extending vehicle life-cycles can be part of a winning strategy.
“The most important thing is to be pro-active. Businesses that fail to act on managing fuel costs, or which continue to ‘invest’ in big, thirsty models will be made to realise that this is a high-risk/ high-cost strategy in today’s climate - and in tomorrow’s as well.”