Taxation & Funding: How the industry has changed in the last 40 years
I have been writing for Fleet World for nearly 15 years now and hope to go on doing so for years to come.
Whilst my general remit has been to write about finance, I’ve ventured further than that over the years and covered a whole variety of topics that I thought would be of interest to fleet managers. A quick look at the subjects we’ve covered in the last year or so gives some idea of the range of topics: diesel engines, finance leasing, the growth of PCP and PCH, the Finance Bill, salary sacrifice, ECOS, tax, how to choose a leasing company, choosing how to fund your cars, fuel benefit tax, tax variation clauses, low emission vehicles, cash for car, mobility solutions and why millennials should love company cars. Cost reduction has been a recurring theme of these articles and by rights this month I should probably be writing something about the revised Finance Bill which was published in September.
But instead I have decided to write about a topic I’ve never covered before. Me. I’m doing this because I’m in a highly reflective mood, dear reader, and I hope you’ll allow me this indulgence.
I’m reflective for two reasons. First, because half way through this article I will type the 2,500,000th word that I’ve ever had published. Second, because today is my 65th birthday.
The age thing confuses me because I don’t feel old at all, though as I look around me I realise that most of my contemporaries have either retired or will do so soon. (And no, before you ask, I have no intention of retiring.)
I wrote my first proper article in 1987, for European Vehicle Leasing Yearbook, on the topic of finance leasing. I said it was the Cinderella product for the financing of cars because it conferred relatively few advantages compared with contract hire. That’s still the case today, though as it happens there seems to be renewed interest in the product.
Since then I’ve had over 250 articles and 15 books published, all aimed at fleet managers and people in the leasing industry. When friends chortle and ask how it’s possible to write so much about vehicle leasing and management, I tell them I find this industry fascinating and wish I had time to write more. My time is taken up with consulting projects for the fleet industry and its clients, research projects and running conferences for the industry. Together these give me a lot of contact with industry practitioners and their clients, and help me keep up to date with developments.
The industry has changed out of all recognition since I joined LeasePlan as a newly-minted chartered accountant at the end of 1979. There were no reliable league tables of top contract hire companies at that time, but if there had been, the largest company would have had perhaps 20,000 vehicles under contract. Company No. 20 would have probably had no more than a couple of thousand. The industry was tiny and had its work cut out educating UK Limited (we didn’t have PLCs back in those days) about the benefits of contract hire. Fleet management was in its infancy in the UK and the industry had only recently started using the word ‘leasing’, because that was what it was called in the States and in those days everything American was infused with a certain cachet.
IT systems were primitive. You keyed things in and when you wanted to know something, you ran a report. These systems were basically repositories of data, they didn’t really help you run your business.
No-one joined the industry knowing anything about it or its products. There were no courses and suppliers had to train their own staff. Much of that training happened on the job.
A whole variety of things have helped the industry grow into what it is today. It was helped along by a period of wage restraint (a government policy designed to hold down wages as a way of reducing inflation – so employers started giving company cars instead of salary increases); some favourable tax changes (particularly allowing leasing companies to recover VAT on the purchase of vehicles) and a general trend towards outsourcing (encouraged by business school graduates who had been taught that businesses should focus on what they’re good at and outsource the rest).
When I joined, the people running contract hire companies were either divisional managers of car manufacturing companies, importers or dealers, or they were entrepreneurs who had set up their own contract hire businesses. Those entrepreneurs have long since sold out and bought golf clubs (i.e. the business, not the thing you hit the ball with) or retired to the Costas. Some were very colourful characters indeed. The people who run leasing companies these days are in the main much more highly qualified than their forerunners. When the banks started buying up leasing companies they introduced policies, new IT and quality management systems and professional operating procedures. The MDs of 1980s’ contract hire companies would be amazed by some of the work that goes on in these businesses nowadays: the breadth of services; intelligent workflow and a solid focus on compliance with regulations.
Whilst I can look back and marvel at the transformation of the industry, I have to be honest and say that I’d prefer to be a newly-minted chartered accountant joining it now because the transition over the next 40, indeed 10 years, will be way more dramatic than we’ve seen before. Autonomous vehicles, digitisation, electrification, customer self-service, artificial intelligence, connected-car-enabled products, internet of things and the arrival of many more and better services made possible by the intelligent use of Big Data – these will eventually make leasing and vehicle management truly unrecognisable. They offer great opportunities for the fleet industry. How we get there, the order in which things will happen, how government action will play into these developments, who the winners and losers will be and what this all means for fleet managers – these are yet to unfold.
The future of fleet management. Bring it on.