Fleet industry experts urge whole life cost focus for company car policies
12 May 2015
Businesses operating their fleet policies based on whole life costs are in the minority, according to according to expert speakers at the ACFO Spring National Seminar.
Speakers at the event said businesses are potentially "wasting" money because they are failing to use WLC as the basis for company car selection.
Dan Rees, senior manager, Deloitte Car Consulting Team, and Mike Brazel, specialist consultant (funding and taxation), Leaseplan, said businesses should look to analyse all costs to deliver a balance between costs, employee demands, environment and fuel management.
While life costs take account of factors including vehicle funding inclusive of any VAT recovery and corporation tax relief, the cost of borrowing money, fuel, employer Class 1A National Insurance Contributions, service, maintenance and repair and insurance as well as any cash allowances paid to employees.
However, Caroline Sandall, ACFO deputy chairman and fleet manager, Barclays Bank, said: "Whole life cost management offers space to be flexible and should be adapted to the needs of individual fleets.
"Businesses should consider how they can refine their current company car choice model and implement improvements."
She said some businesses may need to start adopting some elements of a WLC fleet policy but admitted it could be a complex process.
Sandall said: "Whole life cost management can be extraordinarily complicated.
"But it doesn't have to be. Businesses can take a step transition to get a baseline and start building up data that may be required. Treat whole life costs as a menu because you can't always start with perfection."
Underlining that data capture was critical to fleet cost management, Sandall said: "Businesses cannot achieve a whole life cost management structure unless they have effective data which comes from many sources including internally and suppliers. It is critical to capture all income and expenditure to create a baseline position."
Brazel suggested that "very much a minority" of fleets were operating in whole life cost utopia and added: "Many businesses struggle to capture all their costs in one place. But it is critical to measure, monitor and manage what is really happening. Whole life cost management is a continual process of review, and using them will deliver benefits to employees and the business.
"Using whole life costs as the basis for vehicle selection is eminently doable, but there must be a desire to do it."
Peter Cakebread, chairman of the British Vehicle Rental and Leasing Association and managing director of Marshall Leasing, who chaired the seminar entitled "Effective Vehicle Choice and Fuel and Mileage Management", agreed whole life cost management "is not easy" and "there are areas of complexity", and added: "Relatively few companies go down the whole life cost route when logically they should."
Sandall said one of the reasons behind a lack of companies using WLC to determine company car choice lists is due to a lack of internal fleet management knowledge to manage the process, particularly in SME fleets.
Sandall said: "Whole life costs should be something that is embedded in every company, but it is not because it is not known or understood in many cases. That is why it is important that companies have a level of internal fleet expertise."