Businesses risk 'wasting' cash on company car choice

Companies are ‘wasting’ cash by not employing wholelife costs when selecting their company cars, experts have claimed at the ACFO Spring National Seminar.

Wholelife costs take account of several factors, including fuel, employer Class 1A National Insurance Contributions, service, maintenance and repair, and insurance, as well as any cash allowances paid to employees.

However, delegates were told a lack of fleet expertise - particularly in the SME sector – is resulting in ‘hundreds’ of businesses overpaying for their company car operations.

Caroline Sandall, ACFO deputy chairman and fleet manager, Barclays Bank, said: “Wholelife costs should be something that is embedded in every company, but it is not because it is not known or understood in many cases. That is why it is important that companies have a level of internal fleet expertise.”

More than 100 delegates attended the event arranged by the fleet-decision-makers’ organisation, hosted by Jaguar Land Rover at the Heritage Motor Centre, Gaydon, and sponsored by LeasePlan and Barclaycard Fuel+ in association with The Miles Consultancy.

Sandall said: “Wholelife cost management can be extraordinarily complicated. It doesn’t have to be. Businesses can take a step transition to get a baseline and start building up data that may be required. Treat wholelife costs as a menu because you can’t always start with perfection.”

She continued: “One of the biggest issues with wholelife cost modelling is shifting costs - residual values, purchase price discounts, funding costs and interest rates and insurance, as well as supply chain changes and legislation - therefore businesses should ensure they monitor and look for change and try to predict the future.”

'Greater benefits'

Dan Rees, senior manager at Deloitte car consulting team, highlighted how wholelife costs could be used by employers to offer ‘more attractive’ company cars.

For example, he highlighted how two models with the same list price had a wholelife cost differential of £5,500 operated over a four-year replacement cycle.

He said: “The higher a car’s list price generally the greater the kudos.

“Company cars are hugely emotive, but by using wholelife costs employers can save money and provide greater benefits to staff. List price drives company car benefit-in-kind, but vehicle choice based on wholelife costs delivers driver enhancements.”

Read more in this week’s Fleet News.