Six tips to keep fleets running in challenging times
Fleet Logistics UK has published six top tips to help keep fleets running during these unprecedented times as it says that maintaining continuity, reducing operating costs and, above all else, keeping drivers safe is crucial.
The Birmingham-based fleet management specialist has identified some initial areas for businesses to consider and act upon with many in lockdown or operating at reduced capacity.
1. Look into contract extensions
Leasing companies stand ready to offer support to both their business and personal clients and, rather than returning vehicles at the end of contract and replacing them, fleets should consider asking their leasing company for informal or formal vehicle contract extensions.
Applicable to vehicles coming to the end of their contract, an informal extension would enable them to be extended on a month-by-month basis while the crisis lasts. This delivers flexibility at the current lease and maintenance cost, without any disruption for drivers.
For businesses able to commit short term, formal extensions of typically six or 12 months should be considered. This provides ongoing monthly budgeted costs for both finance and maintenance costs. As contracts are being extended over a longer term, monthly rentals are reduced. This approach is likely to be supported by the leasing company as it provides them with continuity of income.
When looking at which vehicles to extend, fleets should consider keeping those vehicles registered before 6 April 2020 that impact less on both Benefit-in-Kind tax for drivers and Class 1 NIC costs for the business. Also, remember that vehicles with less than 110g/km of CO2 are not affected by the lease rental restriction, meaning 100% of their leasing costs can be offset. Your fleet management provider will be happy to discuss these points in more detail.
2. Consider contract re-writes
Major savings may be available from re-writing contracts based on accurate actual mileages for each driver. This is particularly relevant to fleets still writing contracts on benchmark parameters.
As an example, fleets typically operate on a 36-month/20,000-mile per annum contract but drivers may only be driving 10,000 miles a year. By reducing the contract mileage to 10,000 miles per annum, this will result in lower costs to the leasing company, meaning lower rentals and maintenance costs to their clients. During lockdown, most vehicles will be off the road, meaning this year’s mileage may be even further reduced.
Businesses, or their suppliers, should identify those under-mileage drivers and the contracts that can be re-written, as the savings can be considerable. This applies even in a pooled mileage situation where contracts can be rewritten to reduce any overall surplus in fleet mileage. If in doubt, talk to you fleet management provider or leasing company.
3. Avoid early terminations
Early terminations incur a penalty charge so should be avoided if at all possible. If no other solution can be found, return vehicles close to the end of their contracts to minimise the charges. Investigate, if possible, re-allocating or swapping vehicles to different parts of the business, or between drivers, to avoid these potentially punitive charges.
4. Rethink short- or mid-term rentals
Currently, rental vehicles are classed as an essential service and provide the ability to source vehicles quickly if needed. Key services are prioritised so turnaround times may be affected unless your business falls into this category.
If there are now surplus vehicles on your fleet, consider returning short-term rental vehicles first. They offer flexibility; however, they also represent an often more expensive mobility option and can usually be returned without penalty.
For instance, where there are new employees, who may be waiting for delivery of their company car, look to surplus pool vehicles first or to leased vehicles near their contract end date, as these may be informally or formally extended as described above.
Again, your fleet management provider can provide advice on this.
5. Tackle your fuel bills
With the collapse in world oil prices and fuel cuts at the pumps, this is a good time to renegotiate fuel prices being paid, especially fuel that is being bought in volume.
Fuel is the largest day-to-day operating cost on the company fleet and often businesses lack control over the price paid. Even supermarket pricing, typically the cheapest retail purchasing opportunity, can be more expensive than a negotiated corporate deal on a set weekly rate directly with the source. It is worth investigating options.
For fleets with fixed-term fuel contracts, or in the process of tendering for them, different options, such as hedging or capping which are typically relevant to large commercial fleets, could provide certainty over fuel spend and help when projecting costs over a fixed term. Hedging is a contractual tool that large fuel-consuming fleets can use to reduce their exposure to volatile fuel prices. Your fleet management provider can again talk you through the options.
6. Managing servicing, maintenance and MOTs
It is important to ensure that vehicles are maintained, serviced and MOT’d for driver and public safety, and in line with manufacturer warranties to preserve cover. However, last week, the Department for Transport announced a six-month exemption from MOT testing from 30 March 2020, allowing workers to carry on with essential travel and to help stop the spread of Covid-19. Vehicles must still be kept in a roadworthy condition.
Businesses should set up reminders to ensure drivers carry out required servicing or MOTs when normalcy returns. This will ensure they meet their duty of care obligations in ensuring their vehicles are fit for purpose and warranties remain unaffected.
Sue Branston, country head for Fleet Logistics UK and Ireland, commented: “These changes will support clients to run more cost efficient fleets in the short term as well as when we all get back to normality.
“In these unprecedented times, it is important that every element of the fleet supply chain comes together and works in everyone’s best interests. And we are encouraged by the many examples of this happening at the moment,” she said.