List prices: Fiction pricing affects all kinds of car users
by Ken Trinder, head of business development, epyx
Most car price lists are fiction that bear no resemblance to what happens in reality.
Everyone knows this. And it is not just true of the fleet industry – many retail deals are not far short of the discounts available in the business sector.
Of course, some price lists are more believable than others, but for many manufacturers they don’t represent what really appears on the invoice to a degree of, perhaps, 40% and maybe even more in the current credit crunch environment.
Harmless fiction? Well, no. It affects all kinds of people.
Firstly, the drivers of the cars – they are paying too much benefit-in-kind taxation because it is based on an unsustainable list price.
The same factor affects manufacturers because it makes their cars appear less competitive on the choice list.
If the list price was closer to the invoice price, then the driver would be more inclined to choose their model because of tax savings.
It affects manufacturers in a more insidious way. It makes their residual value figures appear much poorer than they actually are.
Using lower-medium hatches as an example, you might see a spread of residual values (RV) ranging from 25% at worst to 60% at best.
But most of these vehicles at the lower end do not actually retain that small a percentage. In reality, their RVs based on invoice price are nowhere near as bad.
Finally, if you are a fleet buyer, then the often huge gap between list and invoice price makes it pretty difficult to judge when you are getting a good deal.
An economic slowdown provides an ideal opportunity for manufacturers to revise their approach to pricing.
The fleet industry should encourage it.
Insurance: Uninsured drivers costing industry £500m a year
by Denny Payton, Partner Corclaim, Harvey Ingram LLP
The average fines for driving without insurance continue to drop, yet uninsured drivers are killing an estimated 160 and injuring 23,000 people a year.
It is estimated that there are 1.5 million uninsured drivers on our roads.
This is costing the insurance industry £500 million a year and the average motorist around £30 on their insurance premium.
But is this the true cost?
What about companies that are self-insured, or take large deductibles?
Are their losses taken into account?
With increased police powers to seize vehicles, the number of uninsured drivers has fallen from 1.9% to 1.2%, but is this enough of an improvement?
While the offender may get a fine, it is often less than the cost of the insurance premium, so while counting a windfall, the innocent party is left without recourse, often counting the cost of an increased premium.
However, there may be another insurance policy that will pay your claim.
The Motor Insurers’ Bureau will pay claims which exceed £300, provided the loss is uninsured.
The process takes longer, but if there is liability on the uninsured (or untraced) driver, firms should secure a recovery.
It is a sobering thought to think that if an employee is hit by an uninsured driver, companies could end up paying the cost of your own damage, even though your driver was an innocent party.
We all continue to pay the price, it seems, at least twice.
It remains to be seen whether the new proposed offence of being a registered keeper of an uninsured vehicle will make a difference.
Is it too little, too late?
Suppliers: Flexibility is key to success when times are tough
by Don Moore, vice-president of sales, Enterprise Rent-A-Car
Companies are feeling the pinch.
Costs are up, demand is shaky and business confidence could, frankly, be better.
It’s a challenge for many suppliers, but many more should be viewing it as a colossal opportunity, provided, of course, they can be more flexible.
Flexibility means different things to different people, especially in the fleet world.
Organisations that might once have bought their vehicles are now looking to lease, while firms who lease their vehicles might be asking if they should just rent what they need instead.
It’s no longer just the firms in traditionally seasonal or cyclic markets who want a more adaptable approach to their fleets.
All companies are getting in on the act.
“If I need 10 vans for this project,” wonders the fleet manager, “do I really need them for the rest of the year?”
And just as fleets are looking to be more flexible, they are expecting the same from their suppliers.
When large fleets tender, they want a provider willing to give them exactly what they need when they need it.
Small businesses, which operate closer to the edge, can be even more demanding.
If the supplier’s business model requires a dozen sign-offs and a sheaf of paperwork for every client requirement, its customers will soon start to look elsewhere.
In challenging times, no-one needs the extra hassle of a supplier bound by rigid structures and bureaucracy.
Instead, the fleet and rental suppliers who will succeed are those whose services are not set in stone – the ones that have considered and understood the market requirements and, where necessary, adapted their businesses to suit.
Login to comment
Comments
No comments have been made yet.