Mark Sinclair's blog: 4 March 2011 - Poignant moments
04 March 2011
Mark Sinclair is boss of leasing firm Alphabet
I've heard pump prices called a lot of things in recent weeks but the other day I read a comment on a fleet managers' forum that described them as 'poignant'.
'Poignant'? It's more Casablanca than supertanker. Then it clicked.
It means 'a sharp sense of sadness or regret' - and I'm definitely starting to feel that way if I have to pay for a whole tankful at once. And with Brent Crude approaching $110 a barrel, it looks like there's a lot of poignancy still to come for UK motorists.
For example, BCA has reported that demand for 'eco' cars is outstripping supply at auctions, which has led to a significant jump in prices for the most fuel-efficient cars.
With buyers scrambling to get their hands on the most frugal cars in the auction room, BCA checked stocks and found that out of 12,000 vehicles scheduled for disposal, only 78 were in the UK top 10 for fuel economy.
The point is not that there are too few used Toyota Aygos and Citroën C2s to meet demand, but that used car buyers in general seem to be seeing the light about fuel efficiency.
Until now, economy was not something that loomed large on used buyers' radar. When BCA surveyed used car buyers last year, petrol was still the fuel of choice. And less than a third of potential purchasers questioned for BCA's Used Car Report put good economy high on their shopping list.
The upsurge in demand for ultra-efficient small cars is the opposite swing of the pendulum to the one that saw a collapse in demand for SUVs in 2008 and the early part of 2009. That move was a negative reaction to the perception of high running costs but this one is more of a positive flight into fuel-efficient territory that many used car buyers never considered in the past.
It could just be a blip but given the relentless pressure on fuel costs that's unlikely. If it isn't, the used market will become more polarised, with good RVs for fuel-efficient cars and high-end vehicles (whose buyers are not sensitive to fuel prices) and falling demand for the mid-sized, middling-efficiency models that have always been the mainstay of the used market.
Those models are still the mainstay of many a fleet, but their whole life costs will become increasingly uncompetitive compared to low-CO2 alternatives. At the same time, WLCs for small, efficient cars will become relatively more attractive every time fuel prices - and therefore RVs - go up.
Fleets will want to take advantage of the widening WLC advantage of low-carbon cars but there is already some debate about how far they should push it. Last week one leasing company cautioned that drivers would switch to cash if firms set too-low a CO2 ceiling on choice lists, and that this might ultimately cost the employer more than allowing a more generous CO2 limit.
I'm inclined to believe that a well-advised fleet ought to be able to have its cake and eat it. For one thing, a WLC-driven car policy would clearly show the actual cost of providing cars, meaning that the business could set cash alternatives (including mileage allowance rates) that would never exceed the cost of giving drivers a company car. And for another, how many drivers in today's climate really want to take their chances in the used car market when they could have a fully expensed car - perhaps a Golf BlueMotion or BMW EfficientDynamics - in return for a very modest tax bill?
How will the cash driver feel in a year or two's time, with diesel the wrong side of £1.40 per litre and the cost of everything from food to mortgages still rising, when he sees his carefree colleagues in their latest 60mpg company cars? I can't be sure. But I daresay it will be a poignant moment.
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