Choosing a company car that makes business sense
Travel When compiling company car choice lists fleet managers must take into account both corporate and employee issues - they are different and may sometimes conflict.
Car choice has never been so extensive with motor manufacturers producing an ever broader range taking account of size, design and engine technology, which can all add up to a big headache for fleet managers.
However, over riding everything is the business need and the requirement that vehicles on the policy are fit for the intended purpose. For example, supplying a small car to a salesman clocking up 30,000 miles a year is not right, while an engineer with equipment and tools to carry is likely to require an estate model.
Fleet management funding
How vehicles are to be funded is critical for corporates to decide - contract hire and outright purchase are the two most popular methods - taking account of a range of factors including a company’s cash, VAT and corporate tax position; risk attitude, balance sheet implications and capital return.
But, the top priority for company car drivers will be focused around their benefit-in-kind tax burden, fuel economy - assuming personal mileage is funded by the employee - as well as style, performance and specification.
To ensure corporate costs are kept under control best practice dictates that having decided funding channel, car choice lists are compiled according to whole life costs over a predetermined replacement cycle, for example four years/80,000 miles.
Today, fuel accounts for at least 25% of fleet expenditure so it is a critical element when analysing cost
There is no industry standard governing the factors that should be included in whole life cost figures - but the key ones if leasing, the number one fleet funding avenue, is lease rate including service maintenance and repair costs, Class 1A Employers’ National Insurance, blocked VAT and fuel.
Today, fuel accounts for at least 25% of fleet expenditure so it is a critical element when analysing cost. It is also vital that fuel costs are calculated on an ‘actual’ cost rather than a fixed pence per mile rate to ensure the financial benefit of choosing low CO2 emitting cars is reflected - the lower the CO2 figure the higher the MPG resulting in reduced fuel costs.
Finally, if offering a cash allowance in lieu of a company car, it should be cash neutral to employers with drivers’ choice reflecting company car policy.