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ON THE MONEY: Hands up who doesn't take costs into account?

Date: 01 October 2008

Rupert Saunders

It's incredible but a visit to a recent seminar revealed that there are people out there for whom whole-life costs isn't the principal factor underpinning their fleet selection

There's nothing quite like meeting up with some real business car operators to get a reality check, because one of the real dangers of writing a regular column like this is you begin to make assumptions about the industry without really understanding what is going on.

The recent GE Capital Solutions Future of Fleet seminar was a case in point. I had made the broad assumption that whole-life costs were now an established point of reference for anybody running a business fleet. I had assumed every business car operator knows what maintenance costs, and what fuel consumption they are achieving, and how much business mileage is being driven.

So, when first Kevin Gaskell of EurotaxGlass's and then Julie Jenner of ACFO started talking about whole-life costs, I groaned (but only inwardly, you understand). It was the wrong thing to do; especially when Jenner threw a curved ball and asked the audience if there was anybody who didn't use whole-life costs as the basis for their fleet selection.

To my surprise, but I suspect, not her's, about half a dozen hands went up. Indeed, one business car manager in the audience went so far as to suggest the speakers were "talking far too much about cost" and not enough about the benefits of driving company cars. His fleet policy, I discovered later, was based on choice and personal benefit to his drivers.

Now, it would be a foolish business car manager who totally ignored the motivational and retention aspects of driving a decent company-owned car. But equally it strikes me as plain stupid not to take whole-life costs into account, especially in the current economic climate.

The twin demands of providing good, motivational business cars and being cost-effective for your company should not be mutually exclusive. Indeed, I could argue that getting that balance right is what marks a good business car manager out from a mediocre one.

Jenner argued that the trend away from dedicated fleet departments was making this more difficult and that suppliers needed to be doing more to inform fleet managers about the issues. Indeed she even suggested suppliers should be challenging some of the decisions their clients make, rather than let them head off down to wrong policy.

Personally, I don't buy the poor management argument. The economics of running a business car fleet might be complex but the bottom line is not that complicated, especially when expressed in terms of whole-life costs. Executives in HR or purchasing departments are just as capable of understanding the arguments as a dedicated fleet manager.

Much more likely to be an issue is the lack of focus at senior board level where business car decisions are often either a low priority or a matter of personal preference, rather than based on sound economic sense.

But then as the conference audience proved, I am quite capable of making the wrong assumptions in this industry. If you know otherwise, I'd love to hear from you.