Special Feature - Fleet: Park your costs – the expense of running a fleet

Grey fleet
Around four million UK employees use their own cars for business journeys, according to leasing company Alphabet, which creates a vast ‘grey’ fleet that runs up billions of pounds in mileage claims and travel time costs every year.

The cars may be off-balance sheet, but their costs are not. For example, a grey fleet of 200 employees claiming 100 miles per month at 40p per mile will cost their employer £8,000 per month. “Some employees find that a nice source of income, so where they could find alternative ways of doing the job, they don’t,” says Alphabet director Mark Sinclair.

In the current climate, drivers may also delay servicing their vehicles to save money, or where they take cash to buy cars, they may buy a cheap vehicle and pocket the difference ­ creating safety compliance risks. Corporate manslaughter legislation dictates that companies are as liable for employees driving grey fleet vehicles as they are for those driving cars from their owned fleet, and in the event of an accident, companies must be able to demonstrate they have taken all reasonable precaution to ensure the car is fit for purpose.

It is crucial, then, to have control over the grey fleet. But this is fairly simple: it means asking drivers to declare with expenses claims whether they have comprehensive insurance, if they have checked their tyres, and serviced the car in accordance with the manufacturer’s guidelines. It is also important for companies to check that driving licences are clean ­ and if they are valid.

Car clubs
Championing responsible car use by way of reducing emissions, charity Carplus is developing a national network of car clubs ­ literally, getting a lift to and from work or even to meetings with someone else, rather than driving yourself and on your own. But there are savings to be had at a corporate level with this concept, too. “Where there are pool cars or if a company is looking at reducing its core fleet, then a car club will almost certainly save hassle and money,” says co-director of Carplus, Philip Igo. “In a grey fleet, we would expect mileage driven to fall when switching to a car club, partly because use is traceable and partly because people make fewer non-essential trips.”

Car clubs can often manage their own administration and maintenance, and when they sign up to a scheme run by Carplus, organisations can also sign their entire pool over to be run as a car club. Eligible employees get individual smart cards and the company receives a report on time and distance travelled, which can be attributed to chosen cost centres ­ from which it can calculate its carbon footprint. “The average car club reduces mileage by 57%,” says Igo.

Eurostar has used Streetcar to supply its car hire business since November 2007. “At the time, people paid for a hire car and claimed on their expenses, so we set up an account with Streetcar,” says Richard Lettres, an analyst at Eurostar. “Our average monthly bill is £230 and if you consider the cost of car tax, fuel and congestion charges, it comes out well.”

Containing costs
• Define what vehicles are in the fleet, who drives them and how far
• Write cars and driving into your travel policy and communicate that clearly and comprehensively
• Assess the grey fleet in every detail, from drivers’ licences to the roadworthiness of their cars
• Sale and leaseback releases cash into the business and outsources fleet management and the burden of falling residual values
• Flexible rental is more economical than a large pool fleet and removes, or reduces, termination charges
• Car clubs offer flexibility and cost savings
• Think smarter. A make and model that costs more
per month than another may work out less expensive after tax, fuel and servicing
• Shorter contract hire allows companies to take advantage of technological advances in car manufacturing and ensuring low CO2 emissions
• Salary sacrifice schemes allow companies to give a net benefit to employees. The employee benefits from corporate buying power, savings on income tax and NI contributions. The lease company buys cars at a discounted rate and leases them back. The rental rate then is deducted from drivers’ gross salaries and drivers pay benefit in kind
• Be aware of all legislative duty of care requirements