The cost of running company cars and vans is typically second only in business cost wages.

However, evidence suggests that while employers know how much an employee costs, many businesses have little idea of exactly how much they spend on running their fleet of vehicles.

Fleet consultants and industry experts are frequently mystified at the lack of analysis and control mechanisms in place which would enable companies to identify overspend against best practice.

As leading fleet consultant Stewart Whyte, managing director Fleet Audits, warned: “The cost of not knowing is always greater than the cost of finding out.”

In smaller organisations vehicle management is frequently a part-time role. A shortage of expertise and a lack of resource is likely to result in operational weaknesses giving rise to unnecessary expenditure.

With the forecast of another tough year ahead, Small Fleet Review highlights 10 cost-saving tips for small companies.

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1. Identify and record all expenditure individually

Expenditure relating to each vehicle and driver – fuel, servicing, accident costs, tyre costs etc – should all be individually recorded. “You cannot run a fleet just by throwing money at it and logging costs as a line in the accounts no matter how small the fleet,” Whyte said. 

“Accurately accounting for all costs will generate its own vehicle/driver action plan to reduce expenditure.”

 

2. Fleet funding

Every company should undertake an annual review of its fleet funding strategy and more frequently if corporate or legislative circumstances change. Keith Allen, managing director, of leasing provider ALD Automotive, says: “With no single right or wrong answer, the individual demands of each company and their drivers must be taken into account in developing a structured approach to arriving at the optimum fleet solution.”

3. Select the most cost-effective vehicles

All company cars should be ‘fit for purpose’, but businesses should also ensure their employees choose the most cost-effective vehicles. Motor manufacturers, leasing companies and fleet consultants all use wholelife costs to identify the real world cost of running a vehicle over a specific replacement cycle - eg: three years/60,000 miles.

Meanwhile, the lower a car’s carbon dioxide emissions (CO2) the more fuel efficient it will be and the lower the associated corporate and driver-related tax bills. Vehicle wholelife costs are available from Fleet News at www.fleetnews.co.uk/running-costs/

4. Introduce fuel cards

Fuel is the second biggest fleet cost. Although the cost of petrol and diesel has reduced significantly from the 2008 peak, fuel prices are now nudging up. Experts agree that the most straightforward mechanism for managing and controlling spend is to provide fuel cards to all drivers irrespective of whether they drive a company car or their own car.

A reimbursement system should be implemented to ensure that employees pay back the cost of fuel used privately. Management information in reports from fuel card operators provide a wealth of data enabling bosses to monitor vehicle/driver fuel spend, highlight rogues and implement cost-cutting plans.

5. Smarter driving 

The fleet decision-makers’ ‘Holy Trinity’ of issues around cost, environment and duty of care should be viewed collectively. One way of cutting costs is to encourage employees to drive ‘smarter’. It means drivers anticipating what is ahead and driving as smoothly as possible, avoiding harsh and aggressive acceleration and braking.

The Energy Saving Trust has calculated that by adopting the technique motorists could individually save £200-£250 by cutting fuel use by an average 15% a year. Further information is available at www.energysavingtrust.org.uk/smarterdriving

6. Vehicle maintenance

It is vital to ensure that vehicles are serviced and maintained in accordance with warranties and service schedules. A missed service is likely to impact on a vehicle’s secondhand value and cutting corners could breach warranty cover and impact on road safety.

However, companies can save up to 25% on maintenance by using independent garages or a fast-fit instead of franchised dealers, according to Ross Jackson, managing director of consultancy Fleet Operations. Additionally, companies should ensure staff check tyre pressure and tread monthly and adopt a cost-awareness mindset.

7. Invest in road safety

The Government-backed Driving for Better Business campaign believes that investing in safety delivers financial benefits to an organisation’s bottom line of at least 30% from reductions in crashes and savings from improved fuel economy, reduced vehicle wear and tear, residual value enhancements and insurance savings. Further information is available at www.
drivingforbetterbusiness.com.

8. Utilise Smart repairs

Businesses must understand the negative impact of remarketing cars with damage and the positive benefit of appropriate Smart repairs, says auction giant Manheim. A damaged windscreen can devalue a car by between £100 to £300, cracked headlights by £75 to £150 and damage to alloy wheels could mean as much as £150 per wheel.

Minor accident damage is another turn-off. Interior appearance is also important. At less than £90, the average investment in reconditioning can result in an uplift of £250 in sales value at auction.

9. Grow your fleet

It sounds strange but is completely logical, according to Nigel Kerr, head of contract hire – business and commercial, Lombard Vehicle Management. Most cash alternative schemes in lieu of a company car were introduced when financial circumstances were very different from today.

Some organisations are probably paying considerably more than providing staff with vehicles through a well-structured fleet. He said: “The increasing tax incentives to run low-CO2 emitting fleets creates an opportunity for vigilant businesses to save money, and it is now a buyer’s market.”

10. ‘Grey’ fleet focus

Pro-active companies have been quick to spot the link between cost, safety and the environment in relation to the ‘grey’ fleet – employees who drive their own cars on business. Invariably older and less CO2-friendly, some employees use laissez-faire employer controls to boost their ‘income’ by clocking up unnecessary business mileage. 

Additionally, own car use can prove to be a risk-management nightmare. Employers should place controls on ‘grey’ fleet use and encourage the uptake of cost-effective alternatives – car hire, car share, video conferencing or public transport.

Top tips

These top 10 tips show how companies can cut vehicle operating costs by implementing a wide-array of money-saving solutions without impacting on efficiency.

Whyte concludes: “The cost of an unmanaged fleet is always going to be between 100%-150% of the cost of a well-managed fleet. Give an employee the training, accountability and seniority to manage the vehicles and costs will rapidly reduce. The savings available from skilled intervention are far greater than the cost of the skilled intervention.”

Alternatively, Jackson said: “With fleet responsibility in smaller firms usually a part-time role, staff resources can be freed and an individual’s time spent more productively by outsourcing management of the vehicle operation cost-effectively.”