Huge savings can be made from adopting a whole life cost approach when adding new vehicles to the fleet, and not relying on their upfront monthly leasing rentals or front end price, says Mycompanyfleet, the fleet software solutions provider and automotive division of NorthgateArinso.
For many fleet managers, a vehicle’s monthly rental often helps them in their vehicle choice. However, this quick and easy snapshot is not an accurate method of assessing the true financial impact on the operation of a company fleet.
The true cost of a vehicle is its whole life cost which includes manufacturer discounts, taxation, national insurance, fuel economy and CO2 emissions. Special offer rentals that draw buyers in on a short term basis could end up costing more in the long run if you choose the wrong vehicle.
To illustrate the point, Mycompanyfleet compared two vehicles over a typical three year contract hire agreement – a Volkswagen Passat 1.8 Highline TSI 4dr and a BMW 320d ES 4dr.
At around £357 per month to contract hire, the BMW is some £30 per month more expensive than the Passat. But the Passat emits 178g/km of carbon dioxide compared to just 128g/km for the BMW.
And over three years, the Passat’s whole life costs are £23,255 including fuel, national insurance and the tax on the lease rental restriction as its emissions are above 160g/km, the limit at which cars can qualify for full deduction of their lease rentals against profits.
This compares unfavourably to the BMW’s whole life costs of £21,700, with the BMW’s lower CO2 output meaning that it is cheaper to operate over three years by more than £1,500.
Choosing cars that emit less than 160gm/km of carbon dioxide makes perfect sense as these are the most financially attractive under the new rules governing capital allowance and leasing rentals that were introduced in April this year.
Mycompanyfleet’s FleetHR and FleetAcumen software solutions are designed to help fleet managers make the right model choices, identify those which are the most cost efficient and help keep fleet operating costs under control.
Both fleet management systems use a traffic light system to rank each car on the policy list with an environmental rating, with the cleanest cars given a ‘green’ carbon rating and the most polluting, a ‘red’ one.
If the particular model is in the ‘red’, then it is above the 160g/km limit and the fleet manager has the option of introducing a financial penalty for choosing such vehicles, or insisting that drivers have to make a personal contribution towards its cost.
Similarly, financial incentives can be offered to drivers to choose those cars that fall within the ‘green’ zone, as there are both financial and environmental benefits for the company.
Mycompanyfleet business manager Andrew Leech said: “Moving as many cars as possible into the 160g/km or less category will not only offer clear whole life cost benefits, as well as reducing the fleet’s carbon footprint – and this in the perfect time to do it.
“We have designed our fleet management systems to allow fleet managers to help set fleet policy that cuts costs and rewards environmental initiative at the same time,” he said.
