Long-term BiK levels a necessity

Peter Cakebread, Marshall Leasing CEO and former BVRLA chairman

Peter Cakebread, who chaired a seminar entitled ‘Effective Vehicle Choice and Fuel and Mileage Management’, acknowledged that whole life cost management “is not easy” and “there are areas of complexity”; a concern that is exacerbated by a lack of information about long-term Benefit-in-Kind levels from government.

“Better signposting of where BiK levels are going is absolutely vital to fleet managers and leasing companies so we can actually say, with confidence, to drivers at the start of the vehicle life what it will cost them to run that vehicle for the next three or four years,” he explained.

“The national average CO2 emission in Q4 for new registrations last year dropped from 127g/km to 123gkm, while BVRLA averages dropped from 119g/km to 114g/km. I think this reflects that HMRC’s BiK process is effective in driving lower CO2 in the fleet industry… and could prove even more so with better signposting.”

Commenting on the make-up of the BVRLA fleet, Mr Cakebread revealed: “We have seen a decline in the number of vehicles in the upper-medium and luxury segment, down from 43% in 2013 to 36% in 2014. This has been replaced by vehicles in the lower-medium, MPV and supermini sectors. Electric and hybrid drive vehicles now represent 4.3% of the BVRLA fleet.”

Share fuel expenditure with employees

Paul Jackson, managing director, The Miles Consultancy

Paul Jackson explained why data gathered from various sources such as odometers, telematics, fuel cards and fuel receipts is critical in building up a “proper picture” of fuel expenditure, both for the employer and employee.

“But, in our experience that is not happening,” said Mr Jackson. “It is rare that drivers get to see their fuel spend. Hundreds and may be thousands of companies don’t show their drivers what they spend. Make sure drivers see how much they spend on fuel because that will stop a lot of fuel fraud that is happening – drivers will recognise if their fuel card has been cloned.”

He explained how viewing a comprehensive picture of fuel expenditure and sharing it with drivers would ensure that any errors became apparent, delivering potentially tens of thousands of pounds worth of savings to companies depending on the size of their fleet.

Suggesting that giving drivers visibility of fuel spend created a process of “self-auditing”, Mr Jackson explained that HM Revenue and Customs (HMRC) was becoming increasingly active in ensuring compliance with journey management and fuel reimbursement rules.

He warned: “Businesses must ensure that data is available to HMRC inspectors immediately. If employers spend two months trying to find and compile the data HMRC will know that it has not been checked.”

Set benchmarks for whole life costs

Mike Brazel, consultant at LeasePlan

“Very much a minority” of fleets are operating in whole life cost utopia, according to LeasePlan’s Mike Brazel. “Many businesses struggle to capture all their costs in one place, but it is critical to measure, monitor and manage what is really happening,” he explained.

“Whole life cost management is a continual process of review, and using whole life costs will deliver benefits to employees and the business. What whole life cost is really good at if it’s structured properly, is influencing behaviours and encouraging employees to make the right choice of vehicle.

“We all know that fuel is a major cost for fleets, but if we went round the room today we’d hear a variety of answers about how that fuel is paid for – reimbursement, fuel cards, etc; there’s a lack of consistency about how employee’s vehicle use is measured.”

Mr Brazel explained that communicating benchmarks and expectations of how efficient a vehicle needs to be sets a budget at the time of vehicle selection, and gives fleets the best possible chance of achieving whole life cost goals. “Using whole life costs as the basis for vehicle selection is eminently doable, but there must be a desire to do it,” he said.

Treat vans like “little trucks”

Mark Cartwright, head of commercial vehicles, Freight Transport Association (FTA)

Van fleet management must become more professional, according to the FTA’s Mark Cartwright. He explained the impact of regulatory non-compliance, with almost 50% of vans subject to first-time MoT failure, indicating that there could be up to 1.35m “unroadworthy” vehicles in operation.

Mr Cartwright revealed that many vehicles are failing their MoT due to “daft issues” that could be easily rectified, such as light bulbs not working, bald tyres and defective windscreen wipers. He claimed that 85% of Driver and Vehicle Standards Agency roadside checks highlighted defects that could be picked up by van drivers undertaking pre-journey checks.

In acknowledgment of the comprehensive regulatory framework that governs the HGV sector, Mr Cartwright said: “Vans should be treated as little trucks because you get more professionlisation.” For this to be successful, better fleet education about expectations for driver performance and vehicle maintenance will be essential.

There have been calls in some quarters for van operations to be subjected to a tougher compliance framework mirroring, in some ways, the HGV sector. But Mr Cartwright said: “With the launch of Van Excellence we have got our retaliation in first. The industry needs to step up to the mark and demonstrate that it is grateful to have the level of legislative flexibility it has.”

Make perk cars more accessible

Dan Rees, consultant at Deloitte Car Consulting 

Dan Rees prefaced his discussion by acknowledging that embarking upon whole life cost modelling can be intimidating, but urged fleets to take the leap: “Whole life costs is a term which is used fairly widely, and there  are all sorts of things that can be encompassed by the term. But what it comes down to is what is the objective of the company; what are you trying to achieve.”

Mr Rees highlighted how whole life costs could be used by employers to offer “more attractive” company cars by demonstrating BiK comparisons using Deloitte’s Whole Life Cost modelling platform. For example, he highlighted how two models with the same list price had a whole life cost differential of £5,500 operated over a four-year replacement cycle.

“During the recession, cost saving was very much on the agenda and employees had their tin hats on and were not looking to move jobs,” he said. “Now that people are starting to feel more financially secure and motivated to look for a new job, the car has become an emotive benefit again.

“By using whole life costs employers can save money and provide greater benefits to staff. List price drives company car Benefit-in-Kind, but vehicle choice based on whole life costs delivers driver enhancements.”

Manage whole life costs with data capture

Caroline Sandall, deputy chairman of ACFO

Caroline Sandall agreed that making the switch to whole life cost management can be “extraordinarily complicated.” But, she added: “It doesn’t have to be. Businesses should treat whole life costs as a menu because you can’t always start with perfection.”

She suggested that the fact that many businesses don’t use it is a symptom of lacking internal fleet management knowledge, particularly in SME fleets. “Whole life costs should be something that is embedded in every company, but it is not because it is not known or understood in many cases,” she said. “That is why it is important that companies have a level of internal fleet expertise.

“One of the biggest issues with whole life cost modelling is shifting costs – residual values, purchase price discounts, funding costs and interest rates and insurance, as well as supply chain changes and legislation – therefore businesses should ensure they monitor and look for change and try to predict the future.”

Underlining that data capture was critical to fleet cost management, Ms Sandall said: “Businesses cannot achieve a whole life cost management structure unless they have effective data which comes from many sources including internally and suppliers. It is critical to capture all income and expenditure to create a baseline position.”