Sam Sterry's blog: Budget leaves companies in a quandary over fleet
09 November 2018
What are the options for firms trying to keep people on the road but without having to make long-term fleet commitments?
Whilst last month's Budget provided businesses with some certainty over fuel duty, it didn't make things any clearer for those craving clarity over Vehicle Excise Duty (VED) and Benefit In Kind (BIK) rates. With the likelihood of increases following a review next spring once the impact of WLTP changes are fully understood, many firms are, not surprisingly, reticent to make long term commitments to new vehicles at this stage. But they still have a need to keep people and goods on the road.
It's a case of 'limbo-land' for firms of all sizes. But probably the hardest hit are the smaller busineses where there simply isn't the same flexibility over transportation as there is amongst bigger companies. A small firm probably has just a handful of vehicles that need to stay on the road as much as possible.
Delaying replacements increases the risk of vehicle downtime which, in turn, impacts on business productivity. There's also less flexibility when it comes to cashflow in smaller businesses - so the greater certainty that can be achieved over costs, the better.
A 'commitment-free' solution, that doesn't require capital to be tied up in 3-4 year finance agreements, could be the answer for many firms. What firms want is control - control over financial commitments in the short and long-term. And control over immediate costs. A rental solution that provides access to brand new vehicles from three months upwards at a fixed rate - such as Advantage from Europcar - tackles this challenge. Plus, if the solution operates on the same principle as if new vehicles were being purchased or leased - the models are chosen from a stock list - then companies have control over P11D value too.
There's another advantage to opting for a longer term rental solution, rather than outright purchase or lease. That's technology. The fact is having up-to-date vehicles featuring the latest technology as standard, both in terms of vehicle engineering and in-car gadgets and features, is good for business.
Medium term rental provides a crucial stop gap - giving firms certainty of fleet supply for their short to medium term needs, without having to make a long-term commitment that might actually not make good financial sense when the new BIK rates are eventually confirmed. It's the best of both worlds - commitment free but with a fixed rate for certainty over cost. There's also the flexibility to change up or down in vehicle type, without any financial penalty if the organisation's vehicle requirements alter.
Sam Sterry is head of SME at Europcar Mobility Group