Seven ways to ensure optimum fleet procurement in ‘new normal’ business world
The ‘new normal’ business world will bring challenges for fleet procurement but fleets can ensure they’re running at optimum efficiency by evaluating seven key areas.
According to fleet management specialist Fleet Logistics UK (FLUK), as the lockdown restrictions continue to be lifted and the Government attempts to kick-start the economy, businesses face a number of questions and challenges over the future composition of their fleets.
Areas that fleets should explore include:
With many organisations having experienced home working on a larger scale during lockdown, this is expected to continue in some form going forwards. However, as a result, companies will need to carefully consider the types of vehicles they need to run in the future, and whether they could look at operating smaller models or greener alternatives such as electric vehicles and hybrids.
Greater homeworking inevitably means fewer business miles being driven. If an employee with a 50-mile commute works from home for two days a week, that equates to a saving of 5,000 miles a year, or 15,000 miles over a three-year contract. Businesses need to look at the number of employees who may be working this way in the future and renegotiate their mileage benchmarks with their leasing supplier to take into account the new way of working; this will also reduce their lease costs as a result.
Turning to multiple leasing providers not only spreads the risk but also increases the number of credit lines available; a significant potential benefit, especially for business sectors where a credit squeeze could become a major issue. It also enables the introduction of the concept of multi-bidding, with competitive quotes from at least two suppliers for the same vehicle helping to drive down leasing costs for each new vehicle ordered.
Organisations might want to question whether it is advisable to lock themselves into standard 36- or 48-month contracts, when they may need future arrangements that are more flexible. This benefits fleets from smaller credit lines – as fewer rentals are payable – but with vehicle technology changing so quickly, leasing companies may be sympathetic to the idea of shorter contracts so that vehicles are changed more regularly, limiting their exposure to obsolete technology, which can potentially affect residual values over the longer term.
Lease rental restriction
The current CO2 limit for offsetting all leasing rental costs against Corporation Tax is 110g/km. Above 110g/km, the rate falls from 100% to 85%. However, from April 2021, the lease rental restriction limit falls to just 50g/km, as announced in the 2020 Spring Budget. This needs to be factored in to the vehicle fleet policy going forward and fleets should consider how practicable it would be to switch all, or some vehicles, to low-emission, or face higher whole-life costs.
Evaluate electric vehicles
With 0% Benefit-in-Kind tax rates this year, rising to 1% next year and 2% the following year, electric vehicles can provide their drivers with attractively low tax bills, while benefiting operators from reduced Class 1A National Insurance Contributions as well as fuel costs.
The challenge for businesses is to evaluate whether, and how many, EVs might be practical for the fleet based on driver profiles, mileages covered, journey type, driving conditions, charging infrastructure and the number of drivers involved. This could also tie in with the business’s Corporate Social Responsibility (CSR) strategy.
Review vehicle manufacturers
Regular reviews of the vehicle manufacturers on the fleet choice list are always imperative to select the right vehicle mix and OEMs, but could particularly prove beneficial in the current times. Businesses need to select vehicle manufacturers based on a range of factors such as technology, emissions and the impact of WLTP (including vehicle availability), the types of powertrains and their suitability, as well as Benefit-in-Kind tax bills for drivers and the appeal of the range.
Sue Branston, country head of Fleet Logistics UK and Ireland, added that taking action on the current challenges would provide businesses with the opportunity to future-proof their fleets, rethink their supply strategies and increase flexibility and resilience in their supply chains.
“We are focused on using our knowledge and experience to support our clients strategically during the current uncertainty and the benefits are realised in the bottom line by their business,” she added.