• 01926 353 300

Category Archives: News

How the diesel restrictions will affect company car fleets

How the diesel restrictions will affect company car fleets

Now that we are in April, the month within which a High Court Judge declared Defra come up with a better plan for reducing air pollution in 6 cities (London, Birmingham, Leeds, Nottingham, Southampton & Derby) , plans for diesel restrictions and bans are gathering pace. The upshot is the announcement of a £12.50 charge for vehicles entering a London Ultra Low Emissions Zone in a petrol car not meeting Euro 4 standards and diesel vehicles not meeting Euro 6 standards (which City Hall suggest is most petrol cars more than 13 years old in 2019 and diesel cars more than 4 years old in 2019). As well as this there is a so-called “toxin tax” of up to £20 a day also expected to be introduced in “several other UK cities” (presumably those listed above).

But what does this mean for company car fleets, and the mobility of staff around the UK’s major, and maybe not so major, cities?

The Thin End of the Wedge?
Although these charges represent the first steps toward reducing the impact of diesel emissions, whether this is the thin end of the wedge toward an outright ban is unclear. And such bans are not unknown. The mayors of Paris, Mexico City, Madrid and Athens have all confirmed they will ban the use of diesel-powered cars and trucks by 2025, citing alternative vehicle use, cycling and walking as their preferred method of mobility. A seven year run-up should be enough for companies in these countries to adapt their car fleet appropriately, and if they don’t then, well, some medical reps are going to be awfully tired cycling their samples around inner city hospitals.

Indications of a hard stop on diesel in the UK are a little less clear, but pre-brexit legislation suggested that the UK is one of  Six European countries potentially facing hefty fines if it fails to reduce NO2 levels by 2020. And it is the NO2 that is the problem with diesel. Diesel cars were once revered for having lower CO2 emissions than pertrol, by virtue of the fact they are more efficient and use less fuel for the same mileage – less fuel should mean lower emissions. However it is now known that diesel cars spew out high levels of NOx (nitrous oxides and dioxides) which contribute to and exacerbate a number of health issues. A recent study by DEFRA suggested the number of premature deaths in the UK attributed specifically to NO2 at 23,500. So, there are new aggressive plans to clean up air pollution issues and it seems likely diesel cars will bear the brunt of the legislators.

7 questions to be considered
So what must car fleet stakeholders ask themselves in advance of these moves – What is our exposure to the regulations? What percentage of journeys are in potentially regulated areas? Do we begin phasing out diesel engines in newly contracted cars? What about grey fleet cars?

  1. How exposed to these regulations is my car fleet?

Some basic analysis will highlight the number of diesel cars in the current fleet and the potential number over the ensuing 2 years as people change vehicles. The current restrictions will apply to Diesel vehicles registered before Sep 2015, which means they will be four years old by 2019 and most likely in the process of being replaced. Seemingly not much of a concern then for fleets operating with leased vehicles on a 4 year replacement cycle. However, what if the restrictions on diesels extend beyond charges based on Euro 6 and move toward total bans? What would be the exposure? How would it disrupt the mobility of the team?

  1. How do I understand the journey profile of my fleet?

Understanding the exposure to the restrictions is essential to inform strategic choice on fuel types. But how it this achieved? Can existing records determine the journey profile of the fleet and the likely exposure, or would it be necessary to introduce telematics to the vehicles in order to gather a very detailed understanding.

  1. How will this affect the TCO of running a diesel?

What considerations should be made when planning the vehicle strategy if the analysis reveals a large exposure to the regulations, for example many inner-city journeys and/or a large number of older diesel cash allowance and grey fleet cars within fleet (see below). Is the changed TCO of operating a diesel and absorbing regulatory charges more or less than the equivalent TCO of a petrol or ULEV car.

  1. If my fleet is heavily exposed do I begin promoting alternative fuel types?

If indeed ULEV or EV cars are promoted how is the charging procedure and discipline managed. How will the vehicle range impact on the mobility of the team?

  1. How will it impact on cash allowance and grey fleet vehicles?

The BVRLA suggest there are 11.5m grey fleet cars in the UK and 230,000 cars on a cash allowance scheme. Of the grey fleet cars, 30%(3.4m) are diesel and 70% (8m) are petrol, whilst the UK cash allowance fleet is 67% (154k) diesel and 23% (53K) petrol. With an average age of 8.2 years for grey fleet and 5.3 years for cash allowance, the tendency is for these vehicles to be older than any other vehicle segment used in business travel e.g. leased, rental etc,. As vehicles of a certain age are more likely to be impacted by the restrictions, the following shows the likely number of grey fleet and cash allowance vehicles that will be affected.

diesel numbers

Figures from BVRLA : Getting to grips with grey fleet, July 2016

So this suggests 4m grey fleet and cash allowance vehicles will potentially be subjected to the charges. The challenge this presents is more than just the cost of the additional charges, it extends to the administration of the charges. Who becomes responsible for the charges? Is it the company who has asked an employee to travel into a regulated zone, or is it the employee who has chosen to operate a vehicle that doesn’t meet the clean air regulation.

  1. How will it impact cash allowance and grey fleet vehicle car selection policy?

Cash allowance vehicles
Possibly fairly straightforward for cash allowance cars – Cars must meet the Euro emissions regulations, which means older cars will no longer be allowed. Although if current trends are indicative of the car market mix in 2019, there will still be over 75,000 cash allowance cars in the UK that are non-compliant because of age, which means measures to address this will need to begin immediately.

Grey Fleet Vehicles
This is a more of a challenge as over 3.5m vehicles will be non-compliant, so where a company uses grey fleet as part of their mobility strategy the added burden of charges adds to the complexity of using grey fleet. This may become the catalyst to applying more control over grey fleet and understanding how it fits within the mobility strategy of an organisation, BVRLA suggest initiatives such as – analysing the nature of the trips made in grey fleet vehicles, introducing a travel hierarchy, implementing grey fleet alternatives such as daily rental, car clubs and/or leasing.

  1. How will companies manage their CSR policy?

For years organisations have been working hard to reduce their carbon footprint and as transportation has been a large contributor to CO profiles, the diesel car was seen as one of the easiest ways to make positive changes. Now that diesel is under threat, how do organisations remain committed to their CO reduction targets whilst also acting responsibly toward clean air guidelines?

To discuss how the diesel restrictions may affect your company car fleet contact Graham Rees on 01926 353 300

Share this Article

How to Optimise Company Car Replacement Cycles

How to Optimise Company Car Replacement Cycles

Extending your company car replacement cycle produces many arguments for and against. Those in favour say yes… extend and lets benefit from the quick win. Those against are concerned about depreciation and employee morale. It is a big decision and has wide-ranging implications on your company car fleet policy so it is sensible to look at all the ramifications of adding an extra year before making the decision. Much has been written about the optimum replacement cycle and how extending it is counter-productive because of poor residual value, increasing maintenance costs and employee retention risks. However it is becoming apparent that the argument against extending replacement cycles may be losing its strength. And as we will show, the extension can become one part of a much wider strategy to drastically improve company car value to your employees without increasing your cost.

As the world recovers from the global financial crisis many companies find themselves with more choices when faced with the question of company car replacement cycles. During the financial crisis many fleets extended their replacement cycles from 3 to 4 years to compensate for poor residual values producing excessive and unbudgeted depreciation. However as the situation has improved the question of extending the replacement cycle is now from a position of choice rather than necessity. Indeed the 2015 Corporate Vehicle Observatory (CVO) barometer shows that in the UK 21% of small companies and 24% of large companies think usage has increased since last year. So what is the correct choice and what should be considered when making that choice?

The choice will differ from company to company and will be influenced by the demands on the fleet (job-need or status). The fleet-leasing sector typically calculates costs based on a 20,000 mile per year average, which results in the normal car policies of 3yr/60,000 miles or 4yr/80,000 miles. However companies with a job-need car fleet could easily find their employees covering in excess of 30,000 miles per year. This would take a car in its 4th year over the 100,000-mile threshold, which seems to remain a barrier for many. However for the purposes of this review we will deal with the average – 20,000 miles per year, and look at the contributing factors to making the choice and consider whether replacement extension makes good business sense.

Depreciation

The improvement in the quality and reliability of cars is resulting in a flattening of the depreciation curve between years 2 and 5. This extensive study from automotive fleet and Vincentric to crunch the numbers on replacement cycles shows that, as is commonly understood, vehicles lose the vast majority of their value between being driven off the forecourt and year two. Beyond that they depreciate on a much gentler slope.

As vehicle quality improves, extending the use of a car into its fourth year should pose less of an issue, indeed last summers’ budget announced that the UK Government would consult on extending the deadline for the first MOT of new cars from 3 years to 4. Reinforcing the shallow depreciation curve that new cars now enjoy.

Fleetwise, a collaboration between Mercedes Benz and Fleet news, state that there is no evidence to show a sudden drop in value based on a car hitting its fourth-year. As long as the car is driven within company guidelines and follows a managed servicing schedule, there is a much lower risk of greater depreciation than say 10 years ago.

Repairs and Maintenance

Rigorous maintenance and servicing programmes have a big part to play in extending the replacement cycles of company cars. The Fleetwise article highlights the public sector that, through extensive budget cuts, has needed to extend replacement cycles by up to seven years. This may seem unpalatable for the private sector, however needs must, and councils have delivered this by instilling a robust maintenance regime to ensure their vehicles remain reliable and roadworthy.

The Vincentric study, although based on US vehicles, shows that the maintenance on a 20,000 miles per year vehicle jumps drops dramatically in year 4 after potentially substantial costs in year 3. They are assuming that as the vehicle has a higher annual mileage the major maintenance issues come earlier in its life, hence the sharp jump in year 3. The point of the study appears to be that the major maintenance milestones occur either side of year 4.

TCO

Total Cost of Ownership is an increasingly popular way of calculating the true and total cost to the business of operating a company car. The Vincentric study looked at the TCO of more than 2,000 configurations from 25 popular fleet vehicles and included:

  • Depreciation
  • Financing
  • Fees and taxes
  • Fuel
  • Insurance
  • Maintenance
  • Opportunity cost
  • Repairs

All these factors contribute to the true cost of operating the vehicle across a time period. It becomes a far truer picture of company investment as it understands all the associated costs of operating a vehicle (fuel, insurance, maintenance etc). For a vehicle covering 20,000 miles per year its TCO decreased by 21% between year 3 and year 4, but then suffered a substantial increase between year 4 and 5. What the study shows is that this by extending the replacement cycle of a vehicle covering 20,000 miles per year from 3 years to 4 years, the costs in year 4 will be less than the average costs for the first 3 years. Quite a convincing argument that extending the replacement cycle can be a sensible business decision. One more consideration is the impact on the reward package offered by the company. Does a 4-year replacement cycle compromise a company’s ability to attract key talent?

Recruitment & Retention

It has been written that the extension of a vehicles replacement cycle can be off-putting for potential recruits and will weaken the employers bargaining position against other companies offering a shorter replacement cycle. This is obviously a challenge and the replacement cycle should be considered in the context of the whole employment package, industry & employee expectations, industry standards and emotive impact.

However, if a replacement cycle is not viewed in isolation but as part of a combination of tactics to enhance the car offer, then an extension can be part of a wider strategy to improve the car value without increasing the cost to the company.

Fleetworx are experts in fleet supply chain analytics and helping the fleet supply chain work well for everyone. Our interest in tactics such as replacement cycles is one of the things that drive our business. Here you can find an ebook which includes replacement cycles as one of five smart policies. These policies help you create better employee reward packages by offering higher value company cars without increasing your cost base.

In essence, we think extending your replacement cycle can be a very smart move.

Share this Article

Outsourcing Your Company Car Fleet? Be Mindful of These Unintended Consequences

Outsourcing Your Company Car Fleet? Be Mindful of These Unintended Consequences

A key strategy of many companies is to concentrate on core business activity, or “sticking to their knitting” as my old university lecturer used to say, and it is as relevant today as it was back then (even though “then” was quite a long way back!). As phrases such as cost containment and headcount reduction become more common, many business look to all non-core activities to see where they can put such phrases to work. Company car fleet does not escape the scrutiny of the “non-core police”, as it is increasingly likely to find a company’s car fleet being outsourced to specialist providers.

Although the business case can be very compelling, the ramifications of the outsourcing activity can be less obvious. At Fleetworx we help numerous companies deal with the myriad suppliers that become involved in providing an outsourced fleet; that is our speciality, working client-side to manage and direct the supply chain to deliver the best possible solution. However, what we have learnt over the years is that although the principle of outsourcing is sound, there are a number of unintended consequences that impact the client business.

We have created this whitepaper “The Unintended Consequences of Outsourcing Company Car Fleets: And How to Avoid Them“, to help our clients understand these consequences, how they can impact their business and the strategies we employ to avoid them. We look at specifics such as cost creep – unearthing the truth behind the lease suppliers revenue model and what this means for mid and long term costs. We examine the balance of power over knowledge and insight and look at what can happen when fleet becomes stakeholder-led.

If you have come across any other consequences then we would love to hear about them, drop us a line at grees@fleetworx.com.

Share this Article

Manage Your Fleet Spend and Increase Your Savings with Newly-Launched Fleetworx Centrax

Manage Your Fleet Spend and Increase Your Savings with Newly-Launched Fleetworx Centrax

Finding it hard to keep track of all your company car fleet suppliers? Want to know how much you are spending in each category and where your savings opportunities are? Maybe you just want better visibility and control of your fleet supply chain. At Fleetworx we know managing the information and data integral to your outsourced company car fleet supply chain can be a massive challenge, which is why we have launched Fleetworx Centrax™, our proprietary management information system.

Fleetworx work with many companies who have outsourced their company car fleet but who still wish to employ a pro-active approach to its management. So in response to our clients demands for seamless data flow between them and their supply chain, we have developed Centrax. We use Centrax to collate that data, analyse it and then report on it – providing advice and strategic direction that is rooted in the empirical evidence generated by Centrax.

Cloud-based
Centrax consists of 3 cloud-based systems, trax, tasx and strategix, each designed for tasks specific to the management and control of information within a company car fleet supply chain.

Client focused
During the development of Centrax, we spent a long time understanding the needs of our clients and listening to the challenges they face trying to manage and control their outsourced company car fleet. Having complete transparency across the supply chain was vital for our clients, but coping with that in-house was increasingly difficult.

trax and tasx relieve that administrative and operational burden – trax focuses on data collection and analysis, whilst tasx details and organises the operational input required to manage the supply chain.

We also appreciate that reporting on the data within the supply chain is imperative and essential to effective decision-making, hence strategix. strategix puts all the data and information at the fingertips of our clients, allowing them to understand their costs, see savings opportunities and construct what-if planning.

Centrax is integral to the work we do with our clients and is a vital component in providing what we promise everyone we work with – savings, compliance, control.

Click here to find out more about how Centrax could help your company car fleet supply chain management.

Share this Article

How to improve the value of your company car offer by 50%, without increasing your costs

How to improve the value of your company car offer by 50%, without increasing your costs

“How is that possible then?, we hear you ask, and you could easily be forgiven for asking that question. To get an improved vehicle choice and attract key talent, then surely you need to increase your investment in your car fleet, right? Well, not exactly.

We all know that company cars are integral to competitive reward packages. As the employment market continues to improve and recruiting key talent becomes more challenging, offering an attractive company car benefit becomes even more essential. However, offering an exciting company car reward can be a very significant investment and the risk associated with doing it poorly are high.

So, the trick is to offer a competitive and attractive company car benefit, but without increasing your cost. Getting a nice balance between your investment and employee perception.

This challenge is one of our key drivers at Fleetworx and we are constantly reviewing and refining policy, contracts and agreements to produce company car benefit design that produces vehicle choice that belies the actual investment.

To help you achieve this balance we have created this Ebook, “Reward Like a Heavyweight On a Middleweight Budget” – 5 practical steps to help you achieve stand-out company car reward, without increasing your cost. Find out about the most appropriate selection policies, see how clever negotiation can reduce cost and learn how to reduce your incidental spend. We also show you the actual savings that can be made and how you can improve the value of the car by 50% without increasing your costs. So you see, it is possible!

Share this Article

The First Steps into our Future in Motoring

The First Steps into our Future in Motoring

The next generation of ultra-low emission vehicles goes on sale this month with a price tag of £53,000, and that’s after a government grant of £15,000.

The vehicle, a version of the Hyundai ix35, is powered by Hydrogen Fuel Cell technology, which is essentially a means of generating electricity using just Hydrogen and Oxygen, with water as the only bi-product.

The energy is stored in a lithium-ion polymer battery which in turn powers a 134bhp electric motor. The range is approximately 370 miles on a single fill of Hydrogen, which makes it much more flexible than rechargeable electric vehicles.

Refuelling remains the challenge however as with all alternatively powered vehicles, and ‘mobile hydrogen refuelling units’ will be deployed to meet the needs of the early adopters of this technology.

Share this Article

Salary sacrifice – the resurgance of the pseudo company car

Salary sacrifice – the resurgance of the pseudo company car

The launch is part of a wider trial by the HyFive European project, with a consortium of manufacturers aiming to deploy 110 Fuel Cell Electric Vehicles (FCEV’s) direct to the consumer.

There is increasing evidence that the UK is rekindling it’s love affair with the company car, but this time as an integral part of ‘Flexible Benefits.

There is no doubt that the company car has been through a rough period since the turn of the century, as what used to be an ‘under-taxed’ benefit, was transitioned to reflect closer it’s real value. It has taken a while for the social mind-set to adjust to a situation where now, one pays a heavy premium for speed and power, beyond that of the additional cost of the fuel, nevertheless, most people now think about the car emissions equally with it’s status and quality and for the most part, make balanced decisions.

Salary Sacrifice schemes exploit the desire of most people to drive the most efficient car that suits their purpose and because they attract ‘benefit in kind’ tax as a company car would, they only really work if the car is reasonably tax efficient (i.e. low CO2).

The savings for the employee are derived from the fact that the employer costs will be lower than could be achieved by the employee on their own. Chiefly from better discounts, lower finance costs and from the employer’s ability to recover half of the VAT on lease payments. Because payments for the car are deducted from Gross salary, other savings come from reduced Employee and Employer National Insurance contributions. Provided that the vehicle has a low CO2 rating, the benefit in kind taxation should be less than PAYE on the salary that has been forgone.

Provided that suitable care is taken when structuring a scheme, everyone can be a winner (except the exchequer of course).

For detailed advice on managing your company fleet please contact us here at Fleetworx.

Share this Article