If business is the engine that makes the world go around, then company cars provide the wheels that allow it to turn.
Although the humble company car is taken for granted, its role is much more important to business than you may realise. Take the simple example of a vehicle breaking down, which can lead to missed appointments, angry salesmen and extra paperwork.
Nearly every aspect of modern business life requires transport and the car is the only flexible, reliable and cost-efficient option available. It can also be used as an enticing offer to attract new staff.
But just because company cars are essential, doesn’t mean they are straightforward to deal with. The industry is constantly changing, with growing choices of models and brands, options and prices to attract new buyers, while the whole market is swathed in a maze of complicated taxation.
This state of flux has transformed the fleet market in recent years. The nation used to be familiar with ‘Mondeo man’ and fleets of Vauxhalls, but now the sector is being squeezed by premium brands from above, with cars such as the BMW 3-series – and eager new contenders from below, such as the transformed brand of Skoda.
Downsizing has meant drivers have jumped from the Mondeo-sized car into the Focus-sized hatchback in vast numbers, and at the same time, the launch of a carbon dioxide-based company car tax system has meant a wholesale switch to low-emission diesels.
Because the tax system penalises drivers who choose something luxurious that happens to have high emissions, there has been a signifi cant swing to drivers taking the cash option and trying to go it alone with their business motoring. For most businesses, this may seem like an easy option, but it is like taking your hands off the reins at full gallop and seeing what happens. Companies need control of their drivers, for obvious reasons.
So if you stick with company cars (or hybrid cash schemes) then what vehicles should you be providing? Over the next two pages we make our recommendations in six popular categories.
Leasing vs buying
Unless there are specific accounting reasons for choosing outright purchase, companies should have much better things to do with their money than tie it all up in a company car.
The mathematics are simple. If you buy, even using your own loans, then you own a depreciating asset and that has to be recorded on your books. Your company also has to sort out lots of hassles, such as maintenance and selling the car when you want to get rid of it. Admittedly owning vehicles gives you fl exibility, but at what price?
More than half of all fleet cars which hit the roads each year are leased and there is a good reason. Running costs are spread evenly over the life of the lease, whereas with purchase, a vast chunk of a car’s depreciation comes in the fi rst year, while all the hefty bills for repairs normally come in the third year.
So with a leased Ford Focus you might pay about £350 a month for three years/60,000 miles, with a three month deposit up front. But purchase the car for £13,000 and it is worth about 50% of that after just a year.
There are loads of leasing companies to choose from, ranging from the largest, such as Lex Vehicle Leasing, Lloyds TSB autolease, Lombard, LeasePlan and Masterlease, to smaller firms, such as Zenith Vehicle Contracts and Marshall Leasing. Compare prices through brokers and online at each firm’s website. Alternatively, issue a tender document asking for leasing rates on a basket of vehicles. A three-year lease is typical, but four years can be more cost effective. Once you have chosen your parameters, such as three years/60,000 miles, you have to stick to them, as there are excess mileage fees. There are also charges if you don’t look after the car and you need to have comprehensive insurance.
But it is cheap because leasing companies can reclaim VAT on the car, as for them it is 100% business use, a saving which can be passed on. Remember you pay for after-sales service, meaning management reports, driver back-up and low excess mileage charges and fi nes for damage. It also means expert management of penalty notices, which are becoming more of a problem. Paying a little extra may make all the difference in this area. Extra services range from health and safety audits, to vehicle tracking technology.
Fleet management/software
The amount of data handled by the average fleet department is enough to make your computer explode. According to cfc solutions, a leading fleet software fi rm, the amount of fleet data pouring into company offices could rocket by 10,000% in the next decade.
Reports on fuel costs, health and safety, vehicle choices, new suppliers, driver changes, licence checks, garage details and so on all have to be filed and stored effectively. Running a fleet is complicated and needs specialist management support.
There are a number of fleet software packages to choose from, many of them now offering web-based services to keep demands on your own computers to a minimum. Like most good software, they guide you through the processes you need to follow to keep track of your fleet and run out automatic reports that show vehicle performance and any work that needs doing.
It used to be quite a staid industry, but new companies such as Jaama have prompted renewed efforts to introduce software upgrades that can help fleets run their systems better. Apart from online management packages, there are also free services for smaller fl eets, such as cfc solutions’ Fleet Outlook product, which works alongside Microsoft Outlook. Other suppliers include Chevin Fleet Solutions, Drive Software Solutions, Bynx and RAC Software Solutions.
Like most software, you need trained people inhouse to use it, but also receive support from the supplier when you need it. Prices are reasonable but on bespoke systems. Although leasing companies take away the need for internal fl eet lists, accident logs and so on, it pays to have software to provide an independent assessment of the fleet.