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GREY FLEET: Keeping daily rental in mind may be the solution to the grey matter

Date: 18 June 2010

Rob Ingram, UK business development manager, Enterprise Rent-A-Car

Grey fleet can leave companies out-of-pocket and with serious duty of care issues. BusinessCar's Rachel Burgess looks at whether daily rental is a viable alternative

Grey fleet continues to be a thorn in the side of many companies, with cost implications and duty of care among the primary concerns.

The use of employees' own cars has always existed, and will continue to exist, within businesses. But as the recession hit, companies cut fleet car allocation and rental, which meant higher use of grey fleet. Ironically, this would have often resulted in higher costs due to mileage reimbursement.

Now the number of grey fleet cars, estimated to be around four million, has plateaued according to Spencer King, Enterprise's communications director.

"I think we are at the pinnacle of the number of companies using grey fleet. More and more people are talking to us and other companies about other options like rental."

The company's director of business rental, Rob Ingram, says: "Businesses use grey fleets because it's easy, and every firm has a need for them. It is born from convenience, but there are more and more valid arguments for companies to look at their transport policy and consider alternatives."

Ingram says Enterprise is using a consultative approach with firms towards their travel policy, not only advocating daily rental but also public transport and walking where appropriate. Indeed, Ingram admits daily rental is not always the most cost-effective option: "There are certain journeys, for example a 20-mile round trip, that wouldn't benefit from daily rentals, but then there are other options to consider such as public transport.

"A car sharing scheme, which is beginning to replace pool cars, is another substitute."

King adds that journeys of 70-80 miles often become more cost-effective for doing rental.

Business car expert James Langley of Fleet Intellect says that financial justification for daily rental in lieu of grey fleet needs a money value to be placed on safety and duty of care.

"The value attributed will vary from business to business but I find most businesses look for the financial case to be made then see safety and duty of care improvements as additional benefits.

"While daily rental may resolve the issue of the road-worthiness, it still leaves two areas of risk - the driver and the journey - unchallenged."

He adds: "While daily rental will prove cost-effective for some business journeys, it will not be for others. Therefore, it should be one of a range of solutions."

Langley explains: "The costs of car use for business depends on mileage rates paid, but in simple terms it is the difference between the fuel-only pence per mile (ppm) cost and mileage allowance rate actually paid, divided into the daily rental cost that will clarify the break-even mileage. For example, if the business is reimbursing the driver at 40ppm and the fuel cost is 12ppm, the difference is 28ppm. On this basis, a fairly typical £40 per day rental will require a journey of at least 143 miles to be cost-effective."

"There's also other benefits like the cars," says King. "The average age for grey fleet is 6.7 years old, whereas rental cars are rarely older than nine months."

And then there's emissions: Enterprise's daily rental fleet are around 151g/km CO2, considerably lower than grey fleet emissions.

Nigel Grainger from Fleet Risk Consultants says rental cars are serviced, taxed and usually come insured.

"Added to the fact the rental firm should be checking driving licences each time the vehicle is hired and you have a pretty good system."

Kenneth Bowling from Driving Risk Management says managing a grey fleet is not necessarily more difficult. However, if resources and the knowledge to manage it well is lacking, it can become so: "There might well be problems in monitoring vehicles not owned by the business. For example, do you have on record whether/when the 'grey vehicle' needs an MOT or when it was last serviced? Has the vehicle been repaired to an approved standard?"

Considering the size of grey fleet is estimated to be around four million, Bowling says it is not surprising that companies "are slow to manage risk and take control of the problem".

He adds: "Legislation relates to driving for work and not who is the registered vehicle keeper. The firms that truly embrace work-related road safety are no doubt reducing grey fleet miles by rental while managing their remaining grey fleet effectively and safely."

The admin burden of grey fleet may lead firms to rental says Grainger, but equally firms may head back to traditional company cars instead. However, Langley says there are many deployments of private cars that would be cost-effectively satisfied by daily rental along with administrative benefits.

Grey fleet will reduce and rental will increase thinks Bowling, but he says: "Don't expect an overnight change with operators clambering to reduce or better manage grey fleet. Until there is more awareness or adverse publicity this won't happen. I think it is a stable door and horse scenario."

Benefits of daily rental vs grey fleet

. Company has control over choice of vehicle and suitability for the business.

. Vehicles likely to be newer and with better carbon emissions.

. Rented vehicles are more likely to be compliant with the latest safety standards.

. A common issue with private vehicles is that they are not insured for business use - fully comprehensive does not mean cover for business use.

. An employee's vehicle might not project the right image for a company - the average age of a grey fleet vehicle is 6-7 years and they are more likely to have petrol engines with higher emissions.

(Source: Driving Risk Management)