Fleets “wasting” money by not using whole-life costs, finds ACFO seminar
And, in many cases that is because organisations do not employ fleet expertise, particularly in the SME sector, to manage, their company car operations.
More than 100 delegates attended the event arranged by the fleet-decision-makers’ organisation, hosted by Jaguar Land Rover at the Heritage Motor Centre, Gaydon, and sponsored by LeasePlan and Barclaycard Fuel+ in association with The Miles Consultancy.
Dan Rees, senior manager, Deloitte Car Consulting Team, and Mike Brazel, specialist consultant (funding and taxation), LeasePlan, said an ideal world would see all costs analysed to deliver a “balanced fleet” taking account of corporate costs, employee demands and environmental credentials via carbon dioxide (CO2) emissions and fuel management.
However, Caroline Sandall, ACFO deputy chairman and fleet manager, Barclays Bank, said: “Whole-life cost management offers space to be flexible and should be adapted to the needs of individual fleets.
“Businesses should consider how they can refine their current company car choice model and implement improvements.”
Underlining that data capture was critical to fleet cost management, Sandall added: “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.”
Although Sandall said that whole-life cost management can be extraordinarily complicated, she added: “It doesn’t have to be. Businesses can take a step transition to get a baseline and start building up data that may be required. Treat whole-life costs as a menu because you can’t always start with perfection.”
She continued: “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.”
Dan Rees highlighted how whole-life costs could be used by employers to offer “more attractive” company cars. 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.
Admitting that “whole-life costs meant different things to different people” and that it had no clear definition, he nevertheless argued that whole-life costs should be “a business objective”.
Rees added: “The higher a car’s list price generally the greater the kudos. Company cars are hugely emotive, but 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.”