Contract hire: Allowance changes can be a help for fleets
by Andrew Cope, chief executive, Zenith Vehicle Contracts
There has been a lot of scaremongering about the proposed capital allowance and contract hire rental allowance changes –but is the hype deserved?
In fact, for most of our customers the effects are broadly beneficial or neutral, and with some minor changes to fleet policy, a fleet’s position could significantly improve.
Many businesses have been actively reducing the CO2 output of their cars in reaction to a number of different forces, including the driver P11D position, employer national insurance, cost of fuel and environmental awareness.
About 80% of the contract hire vehicles we put on our fleet have CO2 emissions of 160g/km or less.
For these the new rules are good news as costs will be reduced.
For cars over 160g/km the picture is different as the capital allowance changes add to the general post tax cost of ownership.
However, the new contract hire allowance rules soften the impact, particularly on higher value cars.
Therefore, far from being a problem for most businesses that currently use contract hire, the new rules will, in general, reduce their costs and, with manufacturers improving the CO2 efficiency of their vehicles, it can only improve.
But what about other funding methods?
I think there are some clear winners and losers.
ECO is a definite winner as it remains unaltered by the changes, so if ECO worked yesterday it will work tomorrow, especially where employee choice and flexibility are important.
The real losers are outright purchase and contract purchase, which in the future I think, will look like the poor relations to contract hire and ECO.
Vehicle choice: Restricted choice can bring real financial benefits
by Ken Trinder, head of business development, epyx
When I first received a company car in the early 1970s, it was a relatively simple affair.
The company bought all their cars from the same manufacturer, most were the same model – the Hillman Hunter.
The only car park pecking order was prompted by whether yours had a “DeLuxe” or “Super” badge.
This simple approach had some huge financial benefits.
Because all the cars were much the same, purchasing power over acquisition and maintenance costs was concentrated and there were no real human resources issues other than whether you had a car or not.
A company car was primarily company transport.
Things changed mainly thanks to HR departments and became almost decadent.
You could walk around a company car park and find company cars of all types, shapes and sizes from just about every continent in the world.
Now, research shows the situation is changing.
Employers are reducing choice and for very good reasons such as concerns over risk management and the environment.
Of course, as in the age of Mott the Hoople and Edward Heath, this simpler approach continues to bring real financial benefits – a less diverse selection of company cars still means more concentrated spending power and therefore lower costs.
While few of us have any desire to get behind the wheel of a Hillman Hunter every day in 2008, there is much to be said for fleets with a higher accent on practicality and less on perk.
To an extent, the issues facing the fleet manager today mean that the company car is perhaps once again becoming primarily company transport.
Fuel: fleet operators must closely manage their fuel costs
by Meryl Gilbert, business development director – fuel
The financial turmoil recently shows that the economic downturn has taken hold, making cost management a key consideration for fleets.
As a result, fleet operators must manage their fuel costs closely, making a fuel card policy a must.
Without a full understanding of fuel costs, there’s no chance that fleet operators can manage them effectively.
Fuel cards collect essential data on what, where, when and how much fuel is purchased each time a card is used, providing an accurate map of the mileage completed by a fleet.
It is only with this information that the fleet manager can police their drivers effectively.
Through tight management, cost reductions are achievable.
Price-per-litre targets can be set, directing drivers to low price forecourts.
Reports show which drivers are complying.
For many businesses VAT invoicing is an administrative nightmare.
Fuel cards eradicate this problem because drivers are not required to collect and retain individual receipts each time they make a purchase.
Instead, a single invoice allows businesses to easily recover the VAT on fuel.
If you are considering implementing a fuel card policy – a word of caution.
Ensure the provider you select offers good network coverage because if drivers have to travel miles to find somewhere to fill up, it’s a false economy.
The fluctuating price of oil over the past couple of months, moving from over $140 a barrel to less than $50, has created volatile market conditions, making it essential for businesses to take a tight grip on what is an expensive area.
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