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Businesses are being grossly misinformed about the accuracy of whole-life costs according to leasing firm Ogilvie, which claims that different interpretations of exactly what costs are calculated is creating confusion and allowing unforeseen expense to slip through the net.
Ogilvie sales and marketing director Nick Hardy told BusinessCar: "This is a drum we've been beating for a good three years now. We've all heard of WLC. Generally speaking, every leasing company has its own interpretation of how you calculate them, which makes it quite hard to benchmark if they're using WLC but have got multiple suppliers.
"Most companies do WLC as the cost of rental plus the cost of fuel, and that's it. It's not wrong, it's just not right - it doesn't take into account lease rental disallowances, corporation tax; so actually it doesn't do contract hire any justice because contract hire is a tax-efficient way of operating vehicles."
He continued: "You need to give a cost to the client that is the lease rental plus the effective lease rental, plus any lease rental disallowances - which are massively important right now, particularly with the change from 160g/km to 130g/km - add in the cost of fuel and then deduct corporation tax, so you get a net figure. That is the nearest thing a client will have to the true operating cost of that vehicle.
"That's a far better benchmark on which to have a policy determined than P11D value or lease rental because it's incorporating the real costs, which most fleets are still not taking into consideration. Even with fuel being as massive an expense as it is, a lot of fleets are still not including fuel as a determiner to how people should or shouldn't choose cars."
Ed Hummel, sales director at Glass's Guide, agreed that there is significant confusion over accurate WLCs: "In a nutshell, we're supportive of Ogilvie's view.
"We do see a lot of evidence from certain customers that WLCs are made out to be more complicated than they need to be. If you get the data structure right then it doesn't have to be that difficult. The opportunity for us is to help customers do it more simply."
Hardy stressed that fleets shouldn't get hung up on slightly higher rentals: "I'm gobsmacked by how many fleet managers don't take into account the cost of running a vehicle. We've won account after account saying don't worry about another £5 or £10 on your lease cost - that doesn't matter in the grand scheme of things."
Hardy concluded: "This is something that's massively important right now with all the legislative changes that are coming through in April."
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