CONTENTS
03 – Introduction
04 – An Overriding Business Plan for your Fleet
04 – Specifi c Fleet Activities
05 – The Changing Face of Fleet Management
06 – Contract Hire
06 – Maintenance Management
07 – Fuel Cards
07 – Daily Rental And Short Term Lease
08 – Accident Management
09 – Risk Management
09 – Salary Sacrifi ce
10 – What Lies Ahead?
11 – About Grosvenor Leasing
Operating a vehicle fleet has developed into an increasingly complex discipline. As one of the largest overheads faced by most organisations, the difference between a well run fleet and an inefficient one can make a very sizeable impact on a company’s profit margin. Company cars and vans remain a vital ingredient of many people’s remuneration package, and getting the fleet mix wrong can deter high calibre professionals from joining your business, de-motivate existing staff members and cause internal disputes. A motivational and robust fleet policy, on the other hand, can contribute towards high staff morale by offering low emission, desirable vehicles with low personal tax.
From an operational perspective, efficient processes can make the running of a fleet relatively stress free. Get it wrong and it can turn into a time-consuming headache and a burden on resource.
INTRODUCTION
The need to implement highly efficient processes and systems therefore couldn’t be more important. Today’s fleet manager is faced with tightening health and safety, heightened expectations to demonstrate corporate responsibility, rising fuel costs, increasing pressure to ‘go green’ and a whole host of other challenges.
This is all at a time when reports indicate that the number of companies employing a dedicated fleet manager is diminishing, with the job of running the company cars and vans, as well as the grey fleet, being handed to a willing volunteer in the finance, human resources or administration teams.
Never has the need for professional fleet management been greater, yet anyone new to fleet may be daunted by the financial, legal and operational expectations placed upon them. This guide sheds light on the key areas to be considered and is a useful tool kit to anyone who’s remit it is to manage company vehicles and drivers, however large or small the operation.
As well as developing a ‘high level’ business plan to meet your company’s overall aspirations, there will also be specific fleet activities to address.
Like any business operation, most fleets have their strengths and weaknesses but the skill is in pinpointing the weaker areas so that they can be quickly addressed. Unless there is an obvious problem, this can be hard to achieve. Most companies don’t have access to
benchmarking information and therefore never know if they are operating their fleet above or below the market average. At Grosvenor Leasing, we can help you with this by using our data to answer key questions such as:
• If you contract hire your cars and vans, are you paying above or below the average market rental?
• If you purchase your vehicles, are you buying at the right price?
SPECIFIC FLEET ACTIVITIES
• How much should you be spending on fuel for the type of fleet you operate and the mileages covered?
• Are you being overcharged for servicing, maintenance, repair and fast fit items?
• How many accidents is a fleet of your size likely to have, and are you having too many?
• How much could you save by running different, yet equivalent, vehicles?
• Is your annual spend on daily rental cars and short- term lease above or below other businesses of your size?
By developing a high level strategy, supported with a more detailed fleet plan, will give you a strong platform when making decisions, talking to suppliers and determining where to invest your fleet budget to gain maximum return. It also turns the vehicle fleet from being an operational overhead into a measurable aspect of the company’s overall financial and business performance. A carefully considered fleet strategy will have a significant
impact on a company’s financial performance, and contribute towards other essential KPIs for customer service, staff productivity, employee retention and a whole host of other areas.
When writing your business plan for your fleet, it’s important to produce it in collaboration with sales, HR, finance and marketing in order to complement your fleet activities with the overall direction of the business.
AN OVERRIDING BUSINESS PLAN FOR YOUR FLEET
For example:
• Are you looking to expand, hence needing more field-based staff?
• Is there a need to introduce greater efficiencies across the business?
• Are you looking to reduce overheads and expenditure?
• Are you seeking to improve the company’s profile and image?
• Is the company entering new markets or launching new products and services?
• Is customer demand increasing, resulting in more customer visits, deliveries, support calls etc?
• Is there a desire to improve the organisation’s green credentials and reduce its carbon footprint?
Reports indicate that the number of dedicated, in-house company fleet managers is on the decline, ironically at a time when the demands of running a vehicle fleet have grown.
Consequently, companies are now expecting a more extensive level of support from their contract hire and fleet management provider - effectively becoming their complete fleet department, taking on far greater responsibility than ever before.
The fleet sector suppliers have, as a result, had to adapt to this shift in expectation.
Many years ago it was divided into 2 very clear parts.
Contract hire companies would work with clients who leased their vehicles.
Fleet management companies worked with companies who owned their vehicles.
Now, the distinction between contract hire and fleet management has become less dramatic, with most reputable companies offering a complete funding and management solution.
THE CHANGING FACE OF FLEET MANAGEMENT
In addition, dedicated suppliers have entered the market to provide specific services, such as web-based driving licence checks, telematics and online risk management. This has resulted in the contract hire and fleet management specialists taking on a wider ‘vendor management’ role to provide clients with the best portfolio of services, delivered through a single point of contact. Other factors also can’t be treated in isolation. Health and safety regulations impact both company drivers and grey fleet drivers (i.e. those who use their own car for business use) which has increased the pressure on fleet management providers to offer a complete solution, irrespective of vehicle ownership. The recession placed a brighter spotlight on cost control than ever before and the cost-conscious culture is more prevalent than ever; with expectations placed on contract hire and fleet management specialists to work across every aspect of a fleet to drive costs down.
As a result, the relationship between a contract hire/ fleet management provider and a company operating vehicles is more of a strategic business partnership than ever before. Certainly a big step up from the days when the main priority was simply to quote on, and supply, company cars and vans.
Let’s start by dispelling a myth. Not all contract hire is the same.
There is a misconception by many people that every contract hire solution is priced using the same variables, and consists of the same services, however this is rarely the case.
When comparing contract hire rates, check the payment spread. This is the number of payments you need to make up front plus the monthly rentals. If we take a 3 year contract for example, some will be 3 in advance with 33 to follow. Others may be 1 in advance with 35, or 3 in advance with 35 to follow. The way to evaluate the real cost is to work out the total amount by adding up all the payments as a whole and making your price comparisons that way. Next, look at what is included in the service. Does it include maintenance? What does that maintenance service offer you – particularly in terms of numbers of replacement tyres or other items that are likely to be replaced? Is breakdown cover included and to what level?
Maintenance management is extremely beneficial to companies who pay for their own servicing, maintenance, repairs and fast fit items. It’s ideal for either ‘owned’ fleets or companies who choose contract hire on a ‘non-maintenance’ basis.
The purpose of a maintenance management service is to minimise vehicle maintenance costs, remove all administration, simplify all invoicing and maximise driver mobility. Qualified technicians will manage all aspects of vehicle maintenance, only authorise necessary work, ensure only correct prices are paid, apply all discounts and rebates, and provide drivers with a direct line for all support and enquiries.
CONTRACT HIRE
MAINTENANCE MANAGEMENT
AN OVERVIEW OF SERVICES TO
SUPPORT YOUR FLEET STRATEGY
Is the excess mileage comparable with other companies, or does it appear high? Is the vehicle you are looking at definitely the latest model? What are the terms of business at the end of the contract (e.g. for fair wear and tear)? Take time to itemise out the rental and be sure you know what you are getting for your money - otherwise you may end up paying more than you imagined over the full period. Finally, who is managing the vehicle for you once you’ve ordered it and what level of service will you receive? If you are dealing with a contract hire broker, will you be passed onto another supplier once the vehicle is delivered? If you are a small fleet, talking to a very large contract hire company, how important will you be to them as a client?
Contract hire is not just a form of finance. It’s a ‘funded’ vehicle management solution. Always check the level of vehicle management you will receive, otherwise it could become a very expensive and time-consuming headache if you have to organise everything during the contract.
As a service, maintenance management is fast and extremely simple to implement. Drivers are sent a driver card with full contact details and an explanation of the process.
From then on garages and repairers contact the fleet management company’s maintenance team for every item of work and they only authorise necessary repairs, as well as ensure you pay the correct amount.
Each month you receive a consolidated invoice, itemising all work carried out and reducing your involvement to a minimum.
Fuel cards are one of those services that, once in place, companies rarely move away from.
With such strong financial and operational benefits on offer, they provide fleet operators with stringent control over driver fuel expenditure, ensure that only approved drivers or vehicles can purchase fuel on the company account, and by consolidating expenditure electronically the company receives one monthly bill rather than individual expense claims and till receipts from each and every driver.
Daily rental and short-term lease have seen unprecedented growth in recent years as companies keep their options open during unpredictable economic times.
Daily Rental (up to 75 days)
Daily rental is popular when a vehicle is needed with very little notice, for employees not entitled to a company vehicle but who need one for a just a few days, while employees wait for their new company vehicle to be delivered, for colleagues visiting the UK on business from abroad, or when a courtesy car cannot be provided when a vehicle is off road.
Short-Term Lease (for hires of 75 days up to a max of 2 years)
Short-term lease is popular for drivers who have ordered their new company vehicle but are incurring long lead times, for employee probationary periods until their long-term position is confirmed, for longer-term projects and sabbaticals, and when it is hard to forecast the number of fleet vehicles required.
FUEL CARDS
DAILY RENTAL AND SHORT TERM LEASE
Apart from the control it places on drivers, the operational time savings equate to a very sizeable financial saving alone -simply by not requiring someone to spend hours or even days processing and chasing driver claims.
With complete national coverage throughout the UK, the ability to reclaim 100% of the business fuel VAT accurately and online reporting enabling you to identify trends (such as drivers using more fuel than others), it is no surprise that a very large percentage of fleet operators use this system.
The beauty of both services is their immediacy and flexibility - with vehicles being delivered, in many cases, within a matter of hours and returned at a moment’s notice. However, prices can vary across the national rental companies which is why a managed service through a rental management company can bring financial benefits by securing the best rates from a panel of national providers. Excessive costs can be incurred if drivers order vehicles above their entitlement, keep hire cars longer than they need to (because they are enjoying driving them), and when companies discover that a rental vehicle has been with a driver far longer than necessary because no-one has been chasing up the repair or delivery of their main company vehicle.
This is where a rental management service is so effective because the vehicles and drivers are managed for you, as well as the costs.
Accidents, including small knocks and scrapes, are an inevitable and costly aspect of running a vehicle fleet. But what are the advantages of using an accident management service rather than simply processing the claim with your insurers and dealing with it yourself? The harsh reality is that, unless you employ qualified vehicle technicians, it is very hard to know if the repair costs are fair and whether the time the vehicle is off road is reasonable.
Processing accident claims, dealing with the driver, arranging hire or courtesy cars and liaising with the repairing garage can also become a full time job. It’s also one of those tasks that cannot be put off to another day because the longer it takes the longer the driver is without their vehicle.
ACCIDENT MANAGEMENT
What does an Accident Management Provider actually do?
This can be summarised into a number of key areas: 1. Being the point of contact for the driver, which removes a vast quantity of telephone calls and administration.
2. Managing the insurance claim, including all paperwork and administration.
3. Liaising with the insurance company, the repairing garage and the hire car provider (if applicable) to ensure the vehicle is repaired and reunited with the driver as quickly as possible.
4. Analysing the actual vehicle damage against the quoted repair costs and agreeing whether the figures are accurate and fair – more importantly that you are not charged more than you should be for any aspect of the process.
5. Authorising the repair, only once the figures are agreed. 6. Making sure that, if a courtesy car is not available, any hire car charges are kept to an absolute minimum. This is partly done by providing the driver with a suitable vehicle at the best price, but also chasing the repairs so that the time spent in the hire car is kept to an absolute minimum.
7. Providing incident reports and fighting any disputes or ‘battles’ on your behalf (including all correspondence). 8. Instructing any 3rd party recovery.
The upshot is that using this type of service can save a very significant amount of money, a huge amount of time and hassle, and can help protect your premiums from going up and the amount of excess you pay.
It’s an interesting fact that most companies who implement an accident management service rarely go back to handling it internally, which reflects the wide-ranging benefits it offers.
If you operate a vehicle fleet, you’ll be more than aware of the importance of ensuring all vehicles and drivers are safe, legal and compliant.
If we take a quick look at the law, there are 2 Acts to be aware of.
The Corporate Manslaughter and Homicide Act 2007 means that companies and organisations can be found guilty of corporate manslaughter as a result of serious management failures resulting in a gross breach of duty of care. The Health and Safety Offences Act 2008 provides courts with greater sentencing powers for those who break health and safety law and, when it was introduced, it increased the penalties from previous laws.
It is therefore important to take action, because if you do nothing and one of your drivers has a KSI (killed or seriously injured) accident, your company’s directors could find themselves under close investigation from the Police and the Health and Safety Executive (HSE) asking what steps were taken to prevent this.
Salary sacrifice is where an employee surrenders part of their salary in return for a non-cash benefit; in this case, a new, fully managed company car.
The tax and national insurance contribution (NIC) savings available make the schemes attractive to both employers and staff, especially those on higher income tax rates. However, drivers will pay benefit-in-kind tax, which is why the scheme favours those keen to step into low emission vehicles where the tax liability is lower.
Employees will lose any approved mileage allowance payments relief when claiming business mileage, because their vehicle is now classed as a company car. Yet salary sacrifice is seen as an advantageous way of offering a benefit to staff who do not qualify for a company-provided vehicle, and has widespread benefits regarding staff retention, duty of care and company profile.
RISK MANAGEMENT
SALARY SACRIFICE
First and foremost, you should have a driver handbook in place, as well as clear policies regarding all aspects of driving. This should apply to both company provided vehicles, and to your grey fleet (which is the term used for drivers using their own cars for business use).
As a basic minimum you should also check driving licences, conduct risk assessments and take mitigating action based upon those risk assessments. Whilst this may sound time-consuming and expensive, a lot of it can be done online and at very low cost.
Like all aspects of health and safety, fleet risk
management receives a mixed reaction depending on who you speak to. Some companies have a very strong health and safety culture and others only do what is necessary to achieve compliance.
Doing nothing, however, should not be an option and efficient risk management should be simple, hassle free and relatively low cost.
But car salary sacrifice schemes can have pitfalls. For example, if a member of staff can no longer afford to sacrifice the cost of the car (for example, due to long-term sickness) the employer may have to step in and carry that cost.
If an employee leaves the company, or is made redundant, the employer is also faced with an early termination charge, and needs to decide how that bill will be paid – either by themselves or the driver.
There are also issues to be resolved around what happens in the event of the car being in an accident and shortfalls between the motor insurer’s settlement figure and the lease agreement termination charge.
Yet like all things, the pros and cons should be weighed up and Grosvenor Leasing can help with this. It can take three to six months for an employer to implement a scheme properly, and it is only successful if staff take it up.
There are certain trends within the fleet sector that are inevitably going to shape the way companies operate their vehicle fleets.
Electric Vehicles
The Government has made it financially attractive for everyone involved in running company cars and vans to choose lower CO2 emission vehicles, and move towards electric cars.
As a result, motor manufacturers are producing ever-efficient models, there are more electric vehicles being launched and the number of charging points is on the increase. Yet it remains early days for companies and drivers to commit to electric vehicles (EVs) due to concerns about their range and the infrastructure to support them. As a result, uptake is low however with most company cars being run on a 3 or 4 year replacement cycle the likelihood is that when today’s drivers replace their company car next time round they may set their sights on an EV.
As a result, companies shouldn’t leave it too long before looking at EVs, their potential costs and how they may fit into the company car choice lists, and this is something that Grosvenor Leasing can advise upon.
Risk Management
The requirement to run a safe and compliant fleet has become part of every fleet manager’s remit, and this is likely to grow.
Driving is one of the most dangerous activities any employee can undertake and companies will not only find themselves under increasing pressure legally, but also morally. Those who drive at work will expect their employer to demonstrate a duty of care towards them.
WHAT LIES AHEAD?
Companies who do not demonstrate safe working practices may also find themselves being scrutinised by customers and other key stakeholders – at worst, it could damage a company’s reputation, success in the recruitment market and ability to win and retain customers.
Risk management has been a huge growth area in recent years, and any company that has not yet taken the necessary steps to implement safe driving practices will soon find themselves as the exception rather than the rule.
Working Practices
Company cars and vans support the way in which people work, and their level of mobility within their job role. Over time, advancements in technology and business culture change the way we work and this has an impact on how we use vehicles.
Webinars, Skype and other forms of online web conferencing are leading to a cultural shift whereby many ‘quick’ meetings can be conducted from your desk with no need to make a trip. Over time, and as the next generation of workers start their careers (who have grown up with social media and far more use of online interaction) it’s inevitable that we’ll see greater use of technology, reducing the need for as much travel. In parallel, the cost of travel, the time wasted sitting in traffic and ever-growing time and productivity pressures on staff cause many people to question the sense of travelling unless absolutely necessary.
The upshot is that we’re seeing shifts in the way people use their company vehicles already, and every company is advised to monitor, and challenge, its use of company cars and vans in order to determine the best mix for the future.
Grosvenor Leasing is the UK’s largest independent contract hire and leasing specialist.
Established in 1981, the company is highly respected throughout the fleet sector for offering a broad cross section of fleet funding and management solutions, delivered with exceptional service and support. Managing in excess of 10,000 vehicles across the UK, Grosvenor Leasing has the capacity, technology, people and processes to support private and public sector fleets, and businesses large and small benefit from our
proactive approach.
Being independent has significant advantages in the fleet sector. It gives us the flexibility to determine the best way of servicing our customers, it enables quick decisions and a more personal approach. It also means we can determine the optimum and most stable sources of funding.
ABOUT GROSVENOR LEASING
Grosvenor Leasing continues to enjoy controlled growth year on year and has a very long, established client portfolio and an outstanding overall proposition.
Service Portfolio
• Solutions for all makes and models of car
• Solutions for commercial vehicles (up to 3.5 T)
• Contract Hire
• Easi-lease : Our flexible, short-term leasing solution
• Daily Rental / Day hire
• Fleet Management
• Accident Management
• Risk Management
• Fuel Cards
• Consultancy and Advice
• Development of fleet policies
• Online Fleet Management System
• Breakdown and Recovery
t 01536 536 536 f 01536 536 537
e [email protected] Grosvenor Contracts Leasing Ltd
Balmoral House, Kettering Venture Park, Kettering, NN15 6XU.
