Cars are reliable. There is no such thing as a bad car. They hardly ever break down.

That’s an opinion you often hear, but it isn’t actually the case.

Plenty of cars break down – either through their own failure or the failure of their operative – and fleets that have not provided for the eventuality, will find that it costs a lot of money.

According to AA Business Services, company drivers who break down without cover and have to call out a garage on average cost their employers more than £110.

That rises substantially when the vehicle can’t be fixed and has to be recovered.

Roger Williams, at AA Business Services, says: “Driving without breakdown cover is the equivalent of roadside roulette.

“Both drivers and their employers are hit hard if a vehicle breaks down in terms of cost, downtime and stress. Just ask the two million motorists who break down annually without cover: collectively they lost £120 million in the last year – that’s enough to buy a fleet of 12,000 new cars.”

Steve Whitmarsh, senior partnership manager at RAC Fleet & Commercial Services, says that longer replacement cycles mean breakdown cover is more important than ever.

“There are additional factors to consider,” Whitmarch says. “The manufacturer, for example, typically provides breakdown cover for a set number of years.

“After that time, fleet managers must seek alternative cover. Even during manufacturer free cover periods the level can be very basic.”

Even with car fleet getting older, driver mistakes and punctures are still the main causes for breakdowns, and this is a cost base that can be reduced easily by persuading drivers to adhere to a regular checking programme.

According to the RAC’s 2008 Vehicle Fault Analysis (VFA) data, fleet drivers are causing at least 13,715 days downtime as a result of their actions, or inaction.

This equates to nearly 115,000 fleet breakdowns annually that could be avoided if fleet drivers conducted basic maintenance checks of their vehicles and had driver training.

There are generally two types of cover: pay-on-use – where the fleet pays for each event as it occurs and, therefore, bears the risk; and subscription – where the fleet has an insurance policy to cover the risk of breakdown.

Pay on use can be an attractive solution for businesses that have a mix of vehicles on free manufacturer cover and need a facility to “top up” the free cover for types of jobs that are not covered by manufacturer schemes.

Certain bespoke contract structures can deliver tax efficient methods of underwriting the risk associated with pay on use contracts.

A pay-on-use agreement attracts VAT as it is a provision of service; and VAT is recoverable for most fleets.

With a subscription scheme, a fleet will have to pay insurance premium tax which is a non-recoverable tax.

Fleets must weigh up the options and make an informed decision on which type of agreement would be the most suitable dependent on their organisation’s appetite for risk and budgeting requirements.