Arval UK picked up the innovation award in the 2013 BusinessCar Fleet Technology Awards – the Techies – for its online Rental Calculator.

The calculator, which Arval is good enough to house online for any operator to use, compares the journey cost for a rental car with usage of a grey fleet vehicle, and has adjustable parameters for trip mileage, reimbursement rate and fuel price, as well as the size of rental vehicle, reimbursement at actual cost or AFR, delivery address and number of rental days.

Built by Arval’s consultancy team, the tool is one of a number it uses to help stimulate discussion and improvement in customers’ fleet operations, and the Rental Calculator is designed to help cut risk as well as manage cost.

“Individuals have varying degrees of knowledge about what grey fleet is and what is supposed to be checked,” Arval consultant Paul Marchment tells BusinessCar. “I get quite alarmed when someone just gives 45p per mile and leaves them to get on with it, because it’s an education process.”

The calculator, according to Arval, “explodes the myth” that rental is the more expensive option, and Marchment claims that 109 miles is the break-even point for rental versus drivers using their own vehicle and claiming the Government-set Approved Mileage Allowance Payment rate of 45p, depending on variables such as fuel price and number of rental days.

“A lot of our customers have offices that are 80-90 miles apart so it’s a no-brainer – it saves money but reduces exposure to grey fleet, which was a priority for some customers.

“People think 45p per mile is cheap, but they don’t put that out to 200 miles, plus some pay 5p per mile for passengers so you’re up to 50p-55p and the cost grows that way,” he continues. “Even if you break even or it’s £5 more, then using a rental car is clearly the better option.”

Marchment claims that’s because of the extra risk involved in employees using their own vehicle, as well as the necessary admin trail, something Arval doesn’t factor into the cost comparison because it’s an “intangible” and some companies do better than others.

“Before we start any conversation about cost, we present why a company might be running a grey fleet – we don’t scaremonger but highlight some of the risks and what they should be doing to run a grey fleet properly,” continues Marchment. “It isn’t wrong to run a grey fleet – it could be the best thing for the business; however, make sure you’re doing X, Y, Z.”

Cash allowances

Marchment points to some London-based firms that give a cash allowance because their staff all travel by public transport, negating the perk benefit of a company car. It also dovetails with Arval’s recent new focus on cash allowances versus company cars, using Deloitte’s whole-life cost module to look at the level at which the cash allowance should be set.

“With the cash allowance, 40% tax and 2% National Insurance mean £500 is only worth £290, and then you have to add servicing, insurance, road tax etc., so that £290 is easily eroded down to £150,” Marchment explains. “We see our role as education. Lots of cash schemes were put in place a few years ago and the amounts need to be reviewed.”

He claims that changing drivers’ cash allowance is in a box marked “too difficult” because the amounts are written into employees’ terms and conditions.

“We’ve tried to deal with the whole spectrum of grey fleet and company cars – we’ve only recently put the two together. With cash allowance, are you aware you need to check insurance, business insurance, tax, MoT, servicing, and have you got the right policies in place to mitigate these risks?” says Marchment. “Plus, is it portraying the right company image?”

Tools

Arval’s series of business tools are generally developed according to customer requests, and built by the consultancy before going to the sales team for a review prior to being pushed out into the market. The Rental Calculator had to go through an extra level of approval because, in a break from the norm, Arval posted it on its website for general use by the industry, rather than taking customers through it face to face and then leaving it with them, as is the case with the firm’s other operations.

“It’s on our website because it’s very simple to use and difficult to draw the wrong conclusion. It’s intuitive,” explains Marchment.

“We have the range of tools because generally we’ll have an hour with a customer and a broad range of subjects come up,” he continues. “It’s almost a debate you end up in rather than a customer meeting and it does spark interest.” He says the rental calculation devices can be a slow-burn, with people coming back to ask questions in the following days to check that figures are correct.

“With all our models it’s got to be simple and quick because we don’t want to be labouring the point for too long,” Marchment declares. “We’ve got 60 seconds to get a point across and want the customer to feel confident using the tool and not needing a half-day training course to use it.” Those tools currently developed include rental, accident management, grey fleet and free-fuel calculators.

“We can often be sat in meetings with customers specifically looking at an issue, and discussions can go off at a range of tangents, and it’s nice to have the tools to deal with specific issues as they arise,” comments Mike Waters, Arval’s senior insight and consultancy manager. “In most cases, they’re part of a broader discussion with customers, and work better when you can work through the numbers with a customer to reach an appropriate conclusion, although that’s not to say we won’t put more on the website in the future.”

“Lots of them don’t give a definitive answer – they facilitate and allow as to challenge the decision-making in a friendly way,” adds Marchment. “You talk to a fleet operator that has been doing things
in a certain way and if helps open them up to other possibilities.”

Fuel types are another headache for business car fleets, with Arval finding that fleets with a diesel-only policy are unwittingly omitting hybrids from their plans. “They don’t associate petrol with hybrid and therefore they’re ignoring a whole load of vehicles that could help them meet their CO2 objectives,” says Marchment, who claims the firm deliberately avoids mentioning fuel type when talking about whole-life cost.

“One area we will be doing more work on is the number of technologies in the marketplace: petrol versus diesel, and petrol or diesel hybrids, as well as full-electric versus range-extender and plug-in hybrid,” says Waters. “It’s making the decision-making process more complex but providing more opportunities to make good decisions rather than bad ones.”

“We’re seeing an evolution of fleet policies, and diesel really will become very outdated – I can see three or four policies so they can put the technology where it works best,” concludes Marchment. “Our challenge is to show customers that with the technology you don’t have to have a one-size-fits-all policy and it may be doing more harm than good.”

Light commercial vehicle focus

The most recent addition to Arval’s stable is a light commercial vehicle calculator, which the firm developed last month.

“We’re now talking to purchasing directors and HR, not necessarily a fleet director,” explains Arval consultant Paul Marchment. “Some are very knowledgeable and know what their vehicles are being used for; some do a bit but don’t have the capacity to challenge operators; and some don’t understand what they do and come at it from a purely financial perspective.”

He says HR people are focused on keeping drivers happy, while purchasing departments have a sole focus on cost.

“It’s about right-sizing the fleet – do you need 24 heavy vans when you could get away with 15 heavy and some medium vans?” he says. “You can right-size the fleet and then rent with the savings on the occasions when you need a larger van.”

“We’re helping the customer make an informed decision on what they run on their fleet, based on what they need it to do,” adds Arval’s senior insight and consultancy manager Mike Waters. “It can have a big impact if you don’t specify a van correctly; for example, if the loads are too heavy then running costs increase as well as the corporate social responsibility issues.”

The LCV calculator sorts vehicles by load length, load height and payload parameters, and Arval has also built in a list of the kind of equipment different tradesmen would carry, with weights and dimensions, to help non-frontline staff judge the type of vehicles they need if they don’t have that information to hand.
“All vehicles are fit for purpose and with one click it brings in the fuel savings,” declares Marchment.
Arval is already working on version two, which will add vehicle specification, although Waters says whole-life cost has been deliberately sidestepped to try and open customers’ eyes to the options available across different brands.”

What’s next?

Arval’s consultancy team is eyeing a couple of new additions to its range of tools, with a carbon footprint calculator and route deviator top of the list of potential developments, the latter potentially backing up the Rental Calculator.

“Customers don’t appreciate deviation on a route – a motorway closure can turn 90 miles into 120,” explains Arval consultant Paul Marchment. “Postcode to postcode it’s 90, but in reality they have had to do much more. So maybe it would have been cheaper for a driver to use their own car, but it turned out not to be.“