FEATURE: FLEET MANAGEMENT
Managing your fleet costs
If you are looking at your bottom line and reviewing your business running costs, do you know where you can make savings on your fleet? CRAIG WATSON provides some pointers
vehicle as the ‘whole life cost’ and not just the purchase or rental price. In fact, in the vast majority of cases the purchase or rental cost is only half of the whole life cost. What many forget when evaluating the cost of a vehicle is to include fuel, insurance, employers NI, road tax, service and maintenance and cost of funds for the period you’re keeping your vehicle. These additional costs can easily equal or even exceed the depreciation of a vehicle.
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SO WHAT ARE WHOLE LIFE COSTS? Whole life cost is the term used to refer to the total cost of vehicle ownership. This specifically covers the cost incurred during the ownership period of the vehicle and therefore must include depreciation. Using a whole life cost procurement model can save you significant sums regardless of the number of vehicles you operate and can even be used if you are looking to buy a vehicle personally. The elements that should be included into a whole life cost calculation vary on your organisation and how you fund the vehicle.
THINGS TO CONSIDER Purchase Price: This is the on the road price of the vehicle which includes delivery, accessories and discount.
Tax: There are many taxes to consider for organisations and employees when running a fleet e.g: VAT & VAT recovery, Corporation Tax, Benefit in Kind, employers Class 1a NI and more. The P11d value is important to both employer and employee as this is the value both will be taxed on. For the employee it will be the basis of the benefit in kind tax, and for the employer it will be the basis for National Insurance.
Emissions: For some time now successive governments have moved to taxing vehicles based on the CO2 rating; in essence the cleaner the vehicle the less you pay, however there are specific advantages if you are purchasing a vehicle under 160g/km, 110g/km or 100g/km. In some instances a vehicle with a CO2 of 111g/km can cost significantly more than a vehicle that produces 109g/km as an organisation can claim 100 per cent write down allowance on the 109g/km vehicle.
Residual Value: The residual value is the value of the vehicle when you come to dispose of it. Obviously it is difficult to estimate how much your vehicle will be worth in years to come and the experts aren’t always right. The slower rate of depreciation, the higher this figure is likely to be and the lower your whole life cost will be.
Fuel Consumption: Just a few miles per gallon can cost some companies tens of thousands of pounds. Therefore choosing the right vehicle for the job in the first instance has never been so important. With the ever increasing cost of fuel this element cannot be ignored. Furthermore once the vehicle has gone into service continuous monitoring of fuel consumption is a must for all organisations.
34 CHAMBERLINK FEBRUARY 2012
here’s no doubt the cost of running a vehicle keeps on rising. I don’t think anyone would argue that the cost of fuel is ever going to go back the days when it was below a pound a litre. That’s why for quite some time now the fleet industry has evaluated the cost of a
Craig Watson
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