GreenFleet

Fleet managers have always had to keep an eye on costs but nowadays they will be keeping them under constant scrutiny. With credit drying up across the corporate spectrum, businesses will be doing all they can to cut expenditure and save cash.
    
As well as saving money, there will also be a growing need for flexibility. It is quite easy to be flexible when business is good and your company car fleet is getting bigger. But things are more difficult when business is suffering and an organisation is losing contracts or having to make staff redundant. The last thing a fleet manager wants to see is a car park full of cars that are no longer needed. With used car prices falling as quickly as house prices, now is not the best time to be selling this expensive company asset.

Looking at the options
With cost control and flexibility so important, leasing becomes an even more attractive option for fleet managers. Many organisations like the way that leasing enables them to fix their motoring costs. For a set monthly fee they get the use of a smart, new vehicle for a fixed period and mileage. If it is a maintenance-inclusive leasing deal, the fee covers all motoring costs except fuel and insurance. The fact that the company doesn’t own the car means it is protected from any slump in the used car market.  
    
For accounting purposes there is another benefit, because in most cases lease payments don’t appear on a company balance sheet, freeing up cash flow for the business.
    
More and more companies are questioning why they should have money tied-up in a depreciating asset when it could be better invested in growing their business or financing debts. It is not too late if they have already purchased their business vehicles. Leasing companies are seeing a major surge in what are called ‘sale and leaseback’ agreements, where they purchase an organisation’s vehicles and lease them back to them.
     
The continued economic uncertainty is also causing some lessees to re-think their vehicle funding strategy. Some of them are choosing to extend existing contracts for a shorter period instead of signing up for a new three-or-four year contract.
    
Short-term vehicle leasing and rental – for a period of months, weeks, days or even hours – is proving more popular as companies take a more cost-conscious approach to corporate travel. When costs become critical it can make sense to do away with pool cars and private mileage allowances and take the pay-as you go approach to corporate motoring.
    
Another obvious target for efficiencies is fuel. Companies will be looking to reduce unnecessary business mileage by limiting all but essential travel. Regardless of how vehicles are funded, average mileages will continue to fall during 2009. We might expect to see an increase in the 1,500-2,000 miles per annum reductions seen in previous years.

New tax regime
It is, however, not only the credit crunch and fuel costs that will be giving fleet managers sleepless nights in the months ahead. This year sees the biggest legislative change to the industry in more than a decade. A new Corporation Tax regime for business cars has been introduced, demonstrating that the government’s gloves are finally off when it comes to tackling the environmental impact of the UK’s four million company cars.
    
Using vehicle emissions as a benchmark, the new regime will change the way companies claim tax relief on the purchase or lease cost of their business vehicles. It will have major cost repercussions for fleet managers but will give a real financial incentive for those switching to lower emission cars.
    
Although it gives companies the opportunity to cut their fleet costs and improve their environmental credentials at the same time, the new regime will still take some getting used to.
    
The move to an emissions-based tax system means that two cars that look alike and have a similar list price could have a significantly different total cost of ownership due to what comes out of the tailpipe. A difference of just 1g/km could mean many hundreds of pounds difference – for each car.
    
There are a lot of challenges facing fleet managers, and their best tip for survival is probably to seek advice. Whether they speak to their local dealer, a BVRLA member or do their own research via the Internet, there are a lot of easily-made, cost efficient steps they can take to ensure that the months ahead aren’t such a bumpy ride.

For more information
Web: www.bvrla.co.uk