Expert Panel: Leasing
Meet our new leasing experts, who in this first discussion, examine how new challenges such as Brexit, air quality and policy changes are affecting fleet managers
Fleet managers have always had to manage certain challenges, such as lowering emissions, keeping drivers safe and managing costs. But as the role of fleet management has become more complex, together with a changing political landscape that is likely to affect all industries, the types of challenges affecting the sector have evolved.
The recent general election result and the further complications that gives issues like Brexit means that the future continues to be uncertain.
Whether the UK pushes for a ‘hard’ or ‘soft’ Brexit, the aim will be for a trade deal that replaces UK membership to the Single Market. While it is expected that most EU regulations and directives will be retained in some form, there are still challenges that fleets should be aware of, such as a rise in import tariffs which could increase the price of vehicles, tyres and parts. What’s more, restrictions on migration may have an impact on human resources.
The fleet sector will need to keep its ear to the ground to understand how any changes will impact their operations – and plan accordingly.
“In the short-term, the uncertainty caused by the UK’s exit from the EU is challenging to the fleet industry,” says David Cooper from Arnold Clark Vehicle Management. “It’s difficult for businesses to forecast their transport requirements until more details become available. The effect on exchange rates means that prices for vehicles are more volatile than ever. In the next 12 months, we fully expect multiple price increases for each manufacturer.”
Matt Dale, from ALD believes that one of the biggest challenges fleet managers face is the sheer amount of changes that are happening in the motor industry, from changing legislation to the emergence of new technologies. He says: “There’s a vast array of external events that will impact a fleet manager’s decision making. To keep pace they need to keep an ear to the ground while juggling the day to day demands of managing a fleet.”
Rob Mills from Daimler echoes this thought, saying: “The ever‑present challenges of running a fleet are now compounded by more recent pressures on the fleet manager as they look to forecast the ramifications of Brexit for their business, assess the future of business travel and prepare for a zero emission future.”
Air pollution issues
The UK government is under scrutiny over its illegal levels of air pollution and is being taken to court for the third time for failing to adequately handle the problem.
It has been said that poor air quality causes more than 400,000 people to die prematurely in the EU every year. The main pollutant in question is nitrogen dioxide (N02), and emissions from old diesel vehicles are a major culprit.
To tackle air pollution, London has an Ultra Low Emission Zone scheduled (ULEZ) for 2019, while wider plans from the government include Clean Air Zones (CAZs) for Birmingham, Leeds, Nottingham, Derby and Southampton by 2020.
The zones aim to reduce pollution in city centres by discouraging the most polluting vehicles, such as old buses taxis, coaches and lorries, from entering air quality hotspots, while at the same time, encouraging the adoption of modern, cleaner vehicles.
Private car owners will not be affected, although in London, all vehicles will need to meet exhaust emission standards or pay a daily charge.
The future of diesel
As a result of air quality issues, as well the distrust that arose after the ‘dieselgate’ scandal, there is a lot of negativity surrounding diesel at the moment.
Indeed, a recent report by the University of York and the International Council on Clean Transportation has concluded that diesels are emitting up to 50 per cent more toxins than they should, if complying with pollution laws.
However, the SMMT has defended modern Euro 6 diesels, saying that they are the cleanest in history and play a critical part in improving air quality.
With diesel engulfed in negativity at the moment, should fleet managers plan for a future with fewer diesels?
“The commitment to improving air quality is almost certainly going to impact the make-up of the fleet of the future,” says Matt Dale from ALD. “However, fleet managers should focus on solutions that meet their individual requirements and objectives. Any reduction in the number of diesel vehicles in a fleet needs to be an evolutionary process, with careful consideration given to the needs of the company and the drivers themselves.”
“This should include looking at factors such as Total Cost of Ownership (TCO) across different fuel types, not just vehicle categories, and comparing this against the individual objectives of the business, Matt continues. “For example, the TCO on the BMW 3 series is now similar for a diesel, petrol & plug-in hybrid (PHEV) on a 36 month lease agreement. If the reduction of carbon emissions is high on their agenda, this fact alone may influence a fleet manager to consider making alternative‑fuel vehicles available on their fleet policy.”
Rob Mills from Daimler believes that the public perception of diesel has deteriorated due to the fall out from ‘dieselgate’, and therefore has accelerated the demand for non‑diesel vehicles.
Rob says: “What we would recommend to fleet managers is the beginning of a thorough fleet review to examine how some diesel vehicles on fleet can potentially be replaced by petrol, PHEV or even pure EV equivalents. Company car drivers are perceptive to the pressure on running diesel cars as it ultimately hits them in the pocket, and we have seen a move towards PHEVs and petrol in the past few years which will ultimately have helped the fleet manager in removing diesel engines from their fleet.”
“There will always be a place for diesel engines in any fleet where high mileage is a major factor – the challenge for today’s fleet manager is identifying which part of their diesel fleet can be replaced, without impacting on the day-to-day efficiency of the fleet for a short-term gain.”
David Cooper from Arnold Clark points towards the impact the new emission testing method will have on the perception of diesel: “Health concerns about diesel will result in fleet managers looking at other options, and will perhaps accelerate the move to hybrid and electric vehicles. However, the effects of the new real‑life testing regime are still unknown, so fleet managers need to be aware of the potential impact, especially when Benefit in Kind tax becomes based on Worldwide Harmonised Light Vehicle Test Procedure (WLTP) figures.”
David adds: “It has to be said that the recent emissions scandal has dented confidence in diesel, along with NOx health concerns, but some confidence may be restored once the new WLTP testing regime is introduced.”
Advice and support
With clean air zones looming, the push for electric vehicles, a changing political landscape, and changes to policy – organisations need to look carefully at their operations and how any changes might affect them. Firms in the leasing and contract hire industry keep themselves up to date with any changes and so it is a good idea to seek their advice.
“Finding sufficient time and resource to keep track of the many changes happening in the external environment, while managing an efficient and productive fleet is a big challenge for fleet managers,” comments Matt Dale from ALD. “Leasing and contract hire companies can take the pain out of this process by actively sharing their knowledge and expertise with fleets. The best leasing companies will also put clear strategies in place to help businesses cope with such changes.”
Rob Mills from Daimler says that: “Lease companies can provide essential help for the fleet manager by proactively helping them with their fleet reviews, looking at the cost impact of running alternative fuel vehicles to diesel, assessing current fuel spends and looking at the ergonomic routines of both vehicles and drivers to assess whether diesel engines are genuinely required.
“Similarly fleet locations should be monitored to take into account regional variations in fuel costs, and inner city travel should be taken into account where forthcoming government legislation may penalise diesel vehicles,” Rob continues.
David Cooper from Arnold Clark says that working with a leasing firm is not a case of replacing the fleet manager, but rather working together with a specialist vehicle provider to “help improve the fleet, make it more efficient, reduce costs and lower emissions.” He adds: “With a leasing provider, not only do you have access to a source of funds, you also have access to a wealth of knowledge that can be invaluable.”
After sales and consultancy
For most reputable leasing firms, that “wealth of knowledge” doesn’t disappear once the deal is done. It can be tapped into in the form of after sales support and consultancy, which is one of the draws of having a leasing provider on board.
“After sales support and consultancy are important because a customer’s needs aren’t static; they will change over time, as will the demands of the external environment,” says Matt Dale from ALD.
“The delivery of vehicles should not be the end point in the customer’s relationship with their leasing company, but rather the start. Consultancy services can add real value to their customers by effectively carrying out a lot of the hard work for them. From keeping fleet managers up to date with recent legislative changes to performing complex tax calculations on their behalf.”
David Cooper from Arnold Clark echoes this thought, saying: “When you buy a vehicle, you’re pretty much left to your own devices. But when you lease a vehicle, customers can expect leasing providers to offer advice and guidance, to help them meet the mobility challenges they face. Fleet consultancy has become one of the most valuable services offered by vehicle leasing providers.”
Rob Mills from Daimler explains that good after sales consultancy is the difference between working with a leasing and mobility expert that wants to be involved in a long-term partnership – and a supplier that just wants to finance your vehicles once every three to four years.
He says: “Too many times we see lease companies make fleet suggestions because it suits them and not their customer. Genuine after-sales consultancy limits this “lease and go” mentality as fleet managers should be challenging lease companies to justify their recommendations and show a genuine increase in fleet efficiencies – and where possible cost efficiencies too.”
Expert final thoughts
The commitment to improving air quality is almost certainly going to impact the make-up of the fleet of the future. However, fleet managers should focus on solutions that meet their individual requirements and objectives.
Any reduction in the number of diesel vehicles in a fleet needs to be an evolutionary process, with careful consideration given to the needs of the company and the drivers themselves. This should include looking at factors such as Total Cost of Ownership (TCO) across different fuel types, not just vehicle categories, and comparing this against the individual objectives of the business.
Modern hybrids, electric and petrol vehicles are moving forward at some pace, and they do represent a viable alternative to diesel. But with continuing advances in diesel technology, the diesel engine should not be discounted, and remains the best option in many cases.
It has to be said that the recent emissions scandal has dented confidence in diesel, along with NOx health concerns, but some confidence may be restored once the new WLTP testing regime is introduced. Fleet managers have to be aware of changes in technology and government policies and make sure they choose the right car for the right job.
The fall out of ‘dieselgate’ and the switch in focus to NOx emissions has somewhat changed the landscape. In future, fleet managers now face the likelihood that, depending on where they operate, diesel cars may not be allowed in certain areas. They also now have a greater ethical challenge due to the public and driver perception on diesels.
The impact is an acceleration away from diesel being the automatic choice for all fleet vehicles. Advanced vehicle technology and alternatives fuels now means that fleet managers can plan for a future with fewer diesels.