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Why a mixed fleet will make your CEO smile


Company carThe company car scheme, though often overlooked, is a highly emotive part of any benefits package – it is also hugely costly and complex in nature. Peter Eldon recommends implementing a mixed fleet strategy when budgets are being slashed.

The cost alone of running a car scheme ought to mean that when the CEO issues a directive to HR to reduce costs, fleet is one of the first areas to come under scrutiny.

But such is the sensitivity of the car benefit that often the exercise is handled with kid gloves and opportunity is lost. After all, nothing worries an employee more than being told that the car scheme is changing.

“Don’t try to force every driver through the same vehicle funding method (such as contract hire, or cash). “

So what can be done within fleet that meets the requirements from upon high but doesn’t have a negative impact on the value of the scheme? And what if you could actually increase the perceived car benefit under these circumstances?

For any cost-saving initiative to have any real impact, a business needs to be prepared to take a strategic look at its arrangements rather than just tinker with the tactical side of things.

Tinkering with tactics within fleet typically manifests itself in a round of negotiations with fleet suppliers aimed at reducing monthly leasing rates. Whilst a paper saving can be reported to the board, the reality is that it will be eroded by the first change in interest rates or vehicle price hikes. Leasing companies aren’t stupid either – what they give away up front will be recovered somewhere else during the leasing cycle.

Addressing fleet strategy might sound like a scary prospect but it needn’t be so. There is a simple logic to optimising the efficiency of the company car benefit – namely, don’t try to force every driver through the same vehicle funding method (such as contract hire, or cash).

Within every company driver population there will be a mix of low and high business mileage drivers. The ideal solution is to match each driver to the most appropriate funding type – in other words the implementation of a mixed fleet strategy.

Low-cost option

Principally, a mixed fleet strategy works by indentifying the lowest cost option for each driver at the point of selecting a vehicle, and managing them efficiently thereafter (the point at which a specialist mixed fleet solutions provider comes in handy).

The great benefit for drivers is that they can engage with the company car scheme in a way which minimises their own personal costs. How? A high business mileage driver could be paying less in taxable benefit by being offered a structured cash-for-car deal than he would otherwise pay in company car tax. The opposite applies for the low business mileage driver to whom company car tax might cost less than the taxable benefit of a cash allowance.

For the business, a medium-sized fleet can realistically expect to make long term and sustainable six-figure annual savings by using a mixed fleet approach. But it’s not just about the monetary saving.

A mixed approach can create further value within the car benefit package by adding a structured cash option to a previously ‘restricted-badge’ company car policy. Driver choice is widened at no added cost to the employer, with drivers able to trade up or down at their cost.

“There is a case for contract hire and structured cash to sit side by side with a single scheme, along with any other appropriate funding options.”

Many businesses offering a cash-for-car solution suffer the pain and cost of an annual mileage reconciliation exercise, with the inevitable payment of a hefty sum to HMRC. But a properly managed mixed fleet strategy with a monthly mileage logging and payroll reporting facility will remove the need for this most unwelcome of events, optimising tax efficiency and reporting throughout the year.

A good mixed fleet provider shouldn’t be asking you to change your supplier base either. As identified, there is a case for contract hire and structured cash to sit side by side with a single scheme, along with any other appropriate funding options. So that nice supplier that you appointed years ago doesn’t have to be cast aside, but instead can take its place within the scheme as a preferred provider for its particular specialism. Its business level might decrease, but it will surely be grateful for still having some!

And if you are reading this and thinking that you already offer car or cash and therefore have a mixed fleet strategy, then ask yourself these questions:

  • Do your drivers really understand the options available?

  • Is the scheme as cost efficient as it could be?

  • Are drivers seeing the full benefit?

The argument for implementing a mixed fleet strategy is actually pretty hard to challenge. That’s why I am advising HR managers to engage with an established mixed fleet solutions provider and watch as costs go down and driver satisfaction goes up.

And the added benefit to all of this is that you’ll make your CEO happy too, so how about that?

Peter Eldon is managing director at Toomey Opticar Ltd. Email him at [email protected]

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