Effective fleet management
Fleet management is the nearest thing to a juggling act in a circus, and often far more difficult. Liz Swanton looks at efficient fleet management, and different ways to meet your transport needs while also considering environmental issues and admin efficiency.
Fuel efficiency and concern for the environment are hot topics when it comes to buying a car, whether for personal use or corporate. And so it’s not surprising that few of today’s fleets are the one-model-fits-all-purposes purchase they once were, because companies want to maximise efficiency, minimise costs and, hopefully, do it all in a way that does minimal harm to the planet.
According to Paul Scully from LeasePlan, which provides vehicle leasing and management for businesses great and small, more and more businesses are evaluating their environmental impacts closely and fuel efficiency is a greater consideration than ever before.
“A business running all six-cylinder sedans is rare,” Scully says. “Companies are starting to buy cars according to needs. For example, LPG-powered vans address the delivery requirements of a business while reducing running costs and environmental impacts, and diesel-engine vehicles also provide cost benefits as well as reducing the fleet’s environmental footprint.”
However, despite these newer concerns, the basics remain unchanged, says Mark Couter, general manager of corporate sales for Custom Fleet, which handles total management for fleets from one to 1000-plus vehicles. He says efficient fleet management is about the whole life of a vehicle ‘from the cradle to the grave’.
“You buy it, run it, and sell it, but how long do you hold it for? Two years? Five years? There are so many issues beyond buying it, running it as cheaply as you can and then getting rid of it. If you buy a small car for $13,000, you can sell it for $8,000 in two years. If you take it out to five years, it might only be worth $5,000 but in the extra three years you might have to add in three sets of tyres compared to one set in the two-year period and of course higher mileage cuts resale value. So you need to consider the optimal holding period for your investment, and that investment includes all running costs as well as the purchase price and the resale.”
Whether you decide to handle your own fleet management or contract an expert to do it, someone needs to do the analysis of the company’s transport needs. Some basic questions are listed below (see Evaluating Fleet Needs), but you should also consider such questions as who is allowed to drive, what is the company’s insurance liability and what occupational health and safety issues do you need to address.
If you are doing it all yourself, it would make sense to build relationships with your maintenance supplier so you can get the best price on servicing and parts and simplify the paperwork. For the same reason, consider providing employees with a credit card for all their vehicle costs or even just a fuel card. With a fuel card, you may be eligible for a discount off the full bowser price and in both cases it makes things easier for the accounts department.
Of course, buying either a single user-chooser vehicle or a full fleet means money is going to change hands. The old adage ‘buy what appreciates and lease what depreciates’ is worth keeping in mind—and discussing with your accountant—because there are many purchasing options.
You may choose to pay cash for your vehicles, a pay-by-the month lease (either fully financed or operating), which is done through the company or a novated (salary sacrifice) lease package. Those deals can be done direct with the car manufacturer, through a bank or specialist finance company, or through a professional fleet management group, if you’re going down that route.
An operating lease is almost like car rental. You pay the costs during the time of ownership and, if all contract details are met, you hand it back at the end of the agreed term with no penalty, and go on to the next one.
With a finance lease you have car ‘ownership’ at the end of the contract, meaning you make the profit or handle the loss. With a novated lease, the contract is between the financier and the individual who is salary-sacrificing to select their own choice (user-chooser) of vehicle. There can be tax benefits to the novated lease but you need to be aware of the FBT requirements too.
If you’re dealing with a fleet management company, an operating lease can include all the services required to run the car as part of each monthly payment. With a finance lease, the norm is to pay the expenses as they occur.
Managing Fuel Prices
One of the major expenses for a fleet manager to consider is petrol cost. You can insist that your staff members fill up when fuel is cheap or brush up their driving skills (no speeding or hard braking) to use petrol more efficiently, or you could consider other options.
The chase for cheaper fuel prices (or greater fuel efficiency) and less impact on the environment has meant a surge in demand for vehicles that can offer a solution.
Hyundai has noted a definite change in the type of vehicles it is selling. While it is seeing more user-chooser buyers who realise they can get better value for their spend if they choose a Hyundai, the company is also seeing other changes.
“One of our clients has changed from running our Santa Fe to having a fleet of the smaller Tucson, and we’ve also seen some downsizing from Sonata to Getz,” says Joe Scali, senior manager of fleet sales.
“We’re also facing huge demand for the diesel Santa Fe. It is dearer to buy than the petrol model, but fuel economy is so much better. And we find we’re doing very mixed fleet deals. A client might take two of this and three of that—they’re much more use-specific now.”
When it comes to alternative fuel types, Ford has long been synonymous with LPG, after introducing the first dedicated LPG E-Gas Falcon in 1999. Sales of LPG variants have increased strongly in the last few years. In 2004, LPG Falcons counted for 6 percent of annual Falcon sales while to this point of 2007, the LPG models are around 25 percent of total sales.
But Ford is not limiting itself to LPG. A new 2.0-litre turbo-diesel five-door Focus with six-speed manual transmission is the first diesel-powered passenger car in the company’s Australian lineup.
“Consumer demand influenced our decision to launch the diesel Focus, which is a great little car to drive, and we will also have a two-litre turbo-diesel variant in the new Mondeo range which arrives later this year,” says Edward Finn, Ford’s public affairs brand manager.
Diesel power is no longer simply a commercial vehicle or 4WD proposition with most manufacturers offering diesel passenger vehicles in the local market.
The other ‘alternative’ is the hybrid petrol/electric passenger cars sold by Toyota (Prius)
and Honda (Civic). According to Vic Johnston, manager of corporate fleet sales for Toyota, fleet customers are the biggest buyers of the Prius, both big and small. “Major banks, retail chains like Woolworths, car rental companies and a hi-tech yachting instrument company are just some of our customers, and we’re getting a very strong message from all of them about corporate and social responsibility.
“We’re bringing in about 300 every month and we’re selling all of them. We’ll sell about 3,500 this year; we’re aiming for 5000 next year and I think we will be doing around 15,000 by the end of the decade—and not just Prius. Camry will have a hybrid option next year, either as an import or we may build them here.”
Evaluating Fleet Needs
If you’re using a professional fleet management company, they will ask questions in order to assess your needs. If you’re going to do it yourself, it makes sense to chase the same answers:
Do we need vehicles and why?
If we don’t, what alternatives are there (i.e., bus, taxi, more couriers etc)? Is that a saving?
What vehicles do we already have? Can we change the way we use them to reduce costs?
Do they need to do local or long distance work or carry loads and if so, should we replace them with the size of vehicle best suited to each job?
What about an alternative fuel source such as LPG or diesel?
How often should we turn over the vehicles? In the US, many companies hold their vehicles for five years not three. What makes the best economic sense taking whole-of-life running costs into consideration?
Outsourcing Fleet Management
Obviously fleet management companies believe they are best suited to do just that—manage a fleet—and they have some good arguments.
For starters, they are highly experienced at diagnosing exactly what type of vehicles are needed, and coming up with specific solutions. And if you’re dealing with one of the ‘big guys’, they have the sort of buying power that saves their customers money and not just with the vehicles.
Mark Couter from Custom Fleet says their clients get real discounts on tyres, batteries, insurance and registration, servicing/maintenance and fuel—basically all the running costs. “If you’re doing it yourself, you will be paying full retail price on everything and you will be dealing with all the paperwork relating to all those expenses. Having an expert handling it can be far more cost-effective than doing it yourself.”
The fleet industry claims it can provide a 30 percent saving on maintenance and other expenses for a small per-car, per-month management fee. But Paul Scully from Lease Plan says specialist services go beyond the good deals. “Are you fully across all your occupational health and safety obligations when it comes to the provision of work vehicles for your staff? Do you have effective accident management procedures?
“What about accurately forecasting the residual value of the asset in three years, and the FBT implications of vehicle usage. These are just some of the issues that a specialist will address for you that you may not even have thought of,” Scully says.
If you’re not already working with a professional fleet management team, it could be worth thinking about, but it also makes sense that one person in your company should be responsible for all the fleet management details even if you’re using a professional team.
Environmentally Friendly Fleets
Analyse what your company staff members need to do with a vehicle and buy the vehicle/s best suited to those needs. That could be a variety of vehicles rather than one-make one-model.
Consider different sized engines and alternative fuel sources and consider fuel cards for bulk buy savings and efficient invoicing.
Encourage staff to buy their fuel when prices are low—and to remove unnecessary bullbars, roofracks and even golf clubs from the car because extra weight increases fuel consumption.
Use a car wash that recycles its water or a ‘dry-clean’ specialist such as Ecowash.