17/11/2009

By Chris McDonald, Head of Group sales for AA Warranty

If you’re looking to cut back on your company car costs in the current economic climate, your best option could well be to look at a mixed fleet approach. In this article we will discuss the benefits of utilising mixed fleet solutions to both a firm and its employees.

Often employers plump for the easy option of using a one size fits all strategy. But where a company car might be the right decision for one employee, cash allowances or staff car ownership might yield better value for money for both a business and its individual employees.

One of the benefits of having a company car is that it’s a requirement that they all have a sufficient warranty in place, and this means the driver can be safe in the knowledge that at least if their car breaks down any costs or replacement parts needed are covered in their warranty.

To determine the most suitable company car options, firms need to look at factors such as a person’s mileage, tax rate and role within the business, as well ason dioxide emissions.

A mixed fleet approach, put together properly can typically save a business around £1,000 a year per car, if not more. It can also benefit staff financially as good as, if not better than a single company car approach.

Companies that rely primarily on a grey fleet should look at the mileage that their employees are driving, as grey fleets tend to be made up of older vehicles, so it’s more likely that they are less fuel efficient than newer vehicles in a company owned fleet. So as well as driving up fuel costs, this could leave businesses struggling to meet their environmental commitments.

Another key issue when considering the cost effectiveness of grey fleets is that they are usually run and maintained by the employee. If this is done at the rate set by the HM Revenue and Customs authorised mileage allowance of forty pence a mile for the first ten thousand miles and twenty five pence thereafter, then any journey of over eighty miles a day becomes uneconomical.

If businesses want to build up a pool of cars for their staff, it’s a good idea to look at single badge arrangements, where all vehicles are sourced from one supplier, as this is an effective way of ensuring a firm gets a better deal on their cars.

Another popular option is fuel cards, which allow employers a way out of the lengthy process of sorting through receipts and reimbursing drivers. It allows company’s to compare mileage against fuel consumption for both vehicles and drivers, giving them access to a range of statistics when looking at mileage and fuel consumption.

In turn, these findings can be fed into the analysis of a vehicle’s lifetime performance cost calculations — something which firms need to look at to see exactly how much their company car provision is actually costing them.

The cost calculations of a vehicle’s lifetime performance take into account the purchase price of a vehicle compared with its residual value of the car at the end of its contract period, it also allows fleet operators to look at insurance, maintenance and servicing costs.

“A mixed fleet approach can take into account all of these factors. It’s important that businesses come up with the right solution for their staff as well as themselves, as choice of car is often important for attracting and retaining high-quality staff. To balance this against the cost effectiveness for the business, it’s important that the route a company chooses is the right one.

“For companies to cut costs on their company cars they need to avoid being complacent and look into all of the options available to them which will reduce their outgoings, and acknowledge that a mixed fleet approach is probably the most economical solution for them.”


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