April 2, 2016

Cutting Fleet Costs

How To Reduce Fleet Costs And Increase Efficiency

This article reviews a number of areas which could help to reduce fleet costs

The cost of running a company car fleet is likely to be the second or third largest overhead that a company faces. But there are many different ways of running your fleet more efficiently so that fleet management cost to the organisation is controlled as much as possible. For optimum fleet efficiency, take a look at our tips on how to reduce fleet costs.

Reduce fleet costs by choosing your fleet acquisition method carefully

The cost of acquiring vehicles is typically the greatest spend associated with running a fleet, and most businesses either purchase their vehicles outright or lease them.fleet costs

Purchasing vehicles outright requires a high outlay of capital up front. This may mean tying up funds that could be better used elsewhere in your business, or sourcing a bank or other loan to cover the costs.

If you purchase your vehicles outright, you should regularly review whether this is still the best option for your business. Any vehicles you own outright are a depreciating asset, and your business is exposed to fluctuating residual values.

On the other hand, if ownership is not an issue, there are many fleet leasing options available that could deliver considerable savings through better fleet prices, along with a number of benefits including improved cash flow.

There has been a definite shift towards leasing, not least because it provides known, easily budgeted fleet management costs with no hidden surprises. Quite simply, a leasing contract will leave you with a more flexible way of managing strict budgets, helping you to manage fleet costs effectively.

A good fleet management provider should be able to take you through the pros and cons of each acquisition method, carry out fleet management cost analysis and help you make the right choice to determine how to reduce fleet costs.

Extending replacement cycles

Whatever acquisition method you use, extending the replacement cycle of your fleet from, say, three to four years, can deliver immediate and considerable savings by reducing monthly lease rates or vehicle holding costs.

There are clearly human resource aspects to consider in fleet cost management – most employees like to drive newer cars – but the durability of modern vehicles means that a four-year cycle can be adopted with no discernible impact on operational capability.

A possible way to balance HR considerations is to trade back some of the saving made by adopting a longer replacement cycle to drivers in the form of an improved model when they next renew their car.

benefits of a company car company car benefits

Renegotiate buying terms

There are definite fleet efficiency savings to be made by renegotiating your vehicle sourcing terms with supplying manufacturers, and the expertise of your fleet management provider should be put to good use here.

As part of this process, you may wish to reduce the number of manufacturers who appear on your choice list in order to maximise your spending power and improve your fleet prices.

Another excellent way of achieving fleet cost management savings is to access one-off batch deals for a large number of vehicles or to take advantage of short-term special offers.

Negotiating deals of this size can be difficult, so if you don’t have the right purchasing skills or the time, your fleet management provider should be capable of handling it.

Employ competitive tendering to reduce fleet costs

money saving with competitive tendering

Competitive tendering can help you find the most cost efficient leasing rates for new company cars, and reduce fleet costs.

This practice uses a panel of carefully selected leasing companies, rather than a single supplier, and selects only the most cost-effective rates available for each new car or batch of cars to be added to the fleet, determined by natural competition between suppliers.

Experience shows that it is possible to reduce fleet costs by as much as 8-10% by using a panel of preferred lenders in this way, rather than relying on a single leasing company, and that it can play a key role in fleet cost management.

>> Find out more about our competitive panel leasing solution >>

Refine your vehicle policy

Your vehicle policy has a big impact on your fleet costs and considerable savings can be generated by ensuring your fleet management cost analysis recognises vehicles with the lowest CO2 emissions and fuel consumption.

Regular reviews should be carried out on the vehicles available, to ensure you are selecting those that perform best in their class. Your fleet management provider should be able to help you select vehicles with the best fuel economy and emissions.

Where senior employees are eligible for ’perk’ vehicles, it still makes sense to encourage them to choose more fuel efficient cars for tax and environmental reasons, reducing your fleet management costs, and you could also consider offering staff incentives for opting to take lower CO2 models.

By capping CO2 emission levels on the fleet to 120g/km or even lower, and vehicles to 55mpg or better, you could create major fleet cost savings in Benefit-in-Kind tax, National Insurance and fuel costs. This will also help future-proof against forthcoming changes in legislation which will make ever more stringent demands on vehicle emissions.

You could also look at introducing some of the established hybrid and electric vehicles now available from mainstream manufacturers.

Better fleet fuel management

After the vehicles themselves, fuel is often the greatest cost associated with running the car fleet, and one way of managing this is through the use of fuel cards.

Fleet buyers shift from diesel to petrol, hybrids and EVs

Fuel cards enable you to accurately record how much you are spending on fuel, where and when your staff is filling up, and how much fuel is being used in relation to miles driven – giving you greater control over your total fleet fuel management.

Fuel cards can also be used to detect fraud. For example, drivers who are apparently filling up with more fuel than they could have used, or filling up vehicles that are not part of your fleet. In addition, fuel cards can also be used to identify drivers filling up with premium fuels.

On their own, fuel cards will not reduce fuel costs, but significant savings can be generated by carrying out fleet management cost analysis of the data they provide.

Manage your maintenance

Most vehicle leasing packages come with a fixed cost, maintenance-inclusive element, which charges a regular amount per month to cover all routine service, maintenance and repair costs – plus a level of built-in contingency.

Many companies opt for this type of cover as it simplifies their budgeting process, and offers a tidy, no-risk package with one known fleet price.

However, by so doing, they may be missing out on significant fleet management cost savings by not electing for a managed, pay-as-you-go (PAYG) maintenance scheme instead – a system that only allocates maintenance costs as and when they occur.

Experience and analysis shows that fleet cost savings can be achieved, compared to fixed cost maintenance, by opting to go down this route.

PAYG maintenance can also offer a number of benefits including improved cash flow, more transparency and greater flexibility.

Let accident management take the strain

Managing the aftermath of a road traffic accident or damage to a company vehicle can be a frustrating and time-consuming affair. And having drivers off the road for an unnecessary length of time can be expensive.

An accident management service can help make the strain of accidents more bearable and easier to manage, as well as speeding up the whole process.

Experienced claims handlers can record the accident details directly onto a bespoke online claims system, automatically creating a unique record of the incident and speeding up the repair process by as much as 10-14 days.

This reduces vehicle off-road time and the overall cost; factors which most insurance companies take into account when negotiating renewal premiums.

Meanwhile, specialist engineers can assess vehicle damage and decide upon the best, cheapest and least disruptive way to manage it. And repairs are typically authorised within hours of receiving repairer estimates, while supplier progress is monitored until the vehicle is returned to the driver.

At the same time, an extensive network of mobile repairers and fixed body shops can provide the widest national coverage with multiple repair options.

If you would like more information on how to reduce fleet costs, please get in touch. With years of experience providing organisations with fleet management services, we can provide you with the support you need to reduce fleet management costs and improve your fleet efficiency.