Cost management is critical for fleet operators, which is why Key2 Vehicle Management software has functionality that takes account of all transactions and identifies the optimum funding strategy for organisations on an individual basis.

Most fleet managers understand the value in using whole life cost as the basis for choosing the most cost-effective vehicles for company fleets - but, critically, market research suggests that not all decision-makers use total cost of ownership as their selection criteria.

Additionally, some fleet operators do not include all of the relevant data in their calculations so the real whole life cost picture is not fully transparent.

For example, whole life cost calculations from contract hire and leasing companies are often based on a just an effective rental plus the cost of fuel. But fleets should also include, for example, the vital cost associated with employer Class 1A National Insurance contributions and subtract a corporation tax saving before adding back in to the calculation any applicable lease rental disallowance. Additionally, if buying vehicles the cost of borrowing money should also be incorporated.

Martin Evans, sales director at the leading fleet, leasing and rental software specialist, said: “Functionality within Jaama’s Key2 system includes an asset register that enables every item of cost on a per vehicle basis to be viewed. The technology then enables fleet managers to identify whether outright purchase or leasing is the optimum funding solution for their organisation.

“Funding comparisons can be made, for example, on a vehicle-by-vehicle basis or by grouping types of vehicles together. Every public, private or voluntary sector fleet is different so Key2 caters for individuality and enables all cost parameters to be taken into account.”

Whole life costs should reflect all the projected, vehicle-specific costs associated with operating a vehicle over its fleet life, including depreciation (the total difference between the original cost and the residual value projected), funding, service, maintenance and repairs, Vehicle Excise Duty, insurance, fuel (at least the fuel for the business mileage) and Class 1A NIC payments. Also VAT on the fuel scale charge for private use if this is provided.

Costs can be shown as per annum, per month, or per mile but Jaama’s Key2 system will also identify other costs such as, if a vehicle is leased, end of contract charges incurred such as those relating to vehicle condition and breaching pre-agreed contracted mileage levels.

Evans concluded: “Whole life costs should be used in deciding both how vehicles are to be funded and which cars and vans are to be operated. However, for whole life comparisons to be truly effective they must reflect all financial transactions with previous operating history a key guide to future performance.

“Although whole life costs should be a critical determining factor in vehicle selection, the reality is that what costs are actually included vary from fleet to fleet. However, Key2’s functionality enables every single item of expenditure to be incorporated to enable fleet operators to capture the complete financial perspective as to exactly how much an individual vehicle costs to operate across its fleet life.”

More articles on: