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Contract extensions potentially false economy, warns epyx

By / 2 months ago / Latest News / No Comments

Fleets turning to contract extensions to cut costs in the wake of the coronavirus crisis need to consider the SMR cost implications.

Epyx says the SMR profiles of many vehicles often involves considerable extra expense in years four and five

Since lockdown, there has been a rise in fleets turning to contract extensions in a move to save money in uncertain times. But as well as impacting the fleet transition to electric vehicles, such a move could also actually bring added costs.

Epyx, which provides the 1link Service Network SMR platform, says that the SMR profiles of many vehicles often involves considerable extra expense in years four and five.

Debbie Fox, commercial director explained: “It seems like an obvious gain to defer replacing vehicles because it looks as though you are saving money when budgets are under pressure.

“However, the truth can be different. If you examine the cost of SMR over time, it tends to rise quite quickly as the vehicle ages.”

Fox cited industry SMR data, which showed this especially occurred around the point of the first MOT at three years, which was also where the warranty ended for most major manufacturers.

“There are several reasons for this and the picture does vary quite considerably when you look at different models and mileages, but you may find that you will have to buy a complete set of tyres or pass the point at which a major scheduled service is due. For some vehicles, there may even be relatively expensive one-off costs such as the replacement of a timing chain.”

But also there’s the issue of increased fuel costs for older vehicles, compared to newer engine technology.

And there’s the issue of running vehicles with older safety technology, potentially putting drivers at risks.

While extending replacement cycles could prove prudent, fleets looking to simply save money could find a new vehicle or lease would be cheaper, Fox added.

“Really, the important thing is to do the maths and work out which option results in the lower cost. If you lease vehicles, your leasing company should be able to help with this or, if you are a user of 1link Service Network, we will often be able to provide advice.”

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Natalie Middleton

Natalie has worked as a fleet journalist for 16 years, previously as assistant editor on the former Company Car magazine before joining Fleet World in 2006. Prior to this, she worked on a range of B2B titles, including Insurance Age and Insurance Day. As Business Editor, Natalie ensures the group websites and newsletters are updated with the latest news.