Fleet smarts

Without wheels, most businesses are going nowhere. The big question for an increasing number of business owners is ‘who owns the wheels’? Is it smarter to lease or buy company vehicles – and, when it comes to smaller fleets, is vehicle leasing a viable option?

The inherent financial and administrative benefits of leasing are the same regardless of the size of the organisation, says Nigel Bell-Booth, Orix NZ’s sales manager. “Large corporate to small sole trader – or, like the majority of Kiwi businesses, something in between. In fact smaller companies, often with a lower level of capital and personnel resources, are more likely to recognise the direct and immediate advantages of leasing.”
The benefits of leasing are well documented. Dollars loom large. “We’re finding more and more that choosing to lease is around taking the cost out of the business,” says Barry Nicholson, director of sales at FleetPartners.

Not tying up capital in a depreciating asset and removing that asset from the company’s balance sheet; preserving existing lines of credit with other financiers; and being able to take advantage of the significant discounts and trade bonuses available to a specialty lease company are all good reasons to look seriously at leasing.
“It’s an easily-budgeted solution tailored to the customer’s vehicle usage and with minimal risk,” says Mitch Booth, Custom Fleet’s GM Fleet. “When you partner with a company like Custom Fleet you have the added advantage of leveraging from robust asset management practices and significant purchasing power.”
At LeasePlan, MD Charles Willmer says among the key issues they focus on is that lease finance can be cheaper than the weighted cost of capital for a business. Managing the risk is another. “The used car market is a very fickle thing. You buy a car today at $30,000 but what’s it going to be worth in four years time? You don’t know until you sell it. Fix that and you’ve got one of your costs under control.”

The administrative benefits are more subtle and often only readily apparent once a client has experienced a fully maintained lease, says Bell-Booth. They include removing the effort involved in actual management of a fleet; improved effectiveness in operation and selection of fleet vehicles; reduced operating costs through expert maintenance support and assistance and ease of replacement and disposal; plus complete removal of residual risk on vehicle assets.

However, because the business model and cashflow analysis are critical to the decision process, Geoff Tipene, GM at SG Fleet NZ Ltd, suggests business owners running a smaller fleet of vehicles should talk to their accountant before going into a fixed term contract with a lease company.
“In my experience the small fleet owner who changes their business model from ownership to leasing sometimes finds the structure and parameters of an operating lease too restrictive when it comes to term limits, kilometre management, service and repair authorisations, end of term charges and so on.”
Booth makes a similar point. “Because there is no ‘one size fits all’ approach in determining whether to lease [or own], businesses need to take into consideration their financial objectives, available capital and appetite for risk.”
He says more than ever businesses are focusing on effective fleet management; “From choosing fit-for-purpose vehicles to deeper assessments of ‘whole of life’ costs, to joining with a fleet management and leasing company with the expertise and know-how to deliver cost savings and fleet management efficiencies throughout the term.”

Getting it right is all about the conversation, says Willmer. Ask about the merits of finance or operating leases and what’s involved in tailoring a lease to suit individual requirements. Base it on whole of life costs, say the experts. “The sharpest lease price up front may not prove to deliver the best investment at the end of the period,” says Booth.

Choosing a fleet
After a brief spell in the motoring wilderness, the company car is once again an important factor when it comes to attracting – and keeping – staff. In a competitive employment market a company vehicle can provide a genuine point of difference, but business owners should consider fleet uniformity and flexibility when deciding policy in this area, particularly for junior and mid-level employees, says Bell-Booth. “With the enhanced purchasing power a uniform fleet offers, you may well be able to expand the vehicle choice to a higher level model for the same cost, offering an even greater benefit.”
And find a balance between the objectives of the business and that of the individual when choosing ‘benefit’ vehicles, says Booth. “Perhaps limit choice, so that in the event of an individual leaving, the vehicle can easily be used in other parts of the business.”

A trend that’s becoming more evident is adjusting traditional vehicle policies to include vehicles that promote lifestyle balance, says Tipene. “Some companies are now allowing small to mid-size SUVs into their policy to attract staff and also show that a work/life balance is important. Introducing vehicles that accommodate this approach without compromising the company’s standards and OHS policy can really contribute to the productivity of the employee.”

Rising fuel costs and a growing awareness of the importance of reducing CO2 emissions have seen the business vehicles on our roads change enormously over the past decade. And there’s been a significant increase in the availability and popularity of diesel models and, to a lesser extent, hybrids, says Bell-Booth. “Organisations recognise not only the long term fuel cost benefits but also the green credentials these offer their public image. However, in many cases, particularly on fleets that travel only a relatively low number of annual kilometres, the fuel cost benefits of diesel or hybrid vehicles are offset by the higher initial purchase price and maintenance costs.” He says Orix uses a whole of life cost analysis on each selected vehicle to enable a direct economic comparison between models and identify the best value option.
For many business owners the focus on survival since the GFC meant driving a more environmentally-friendly fleet found itself on the backburner. Most people agree being green isn’t cheap, says Tipene. “Companies are looking at cost efficiencies as they recover from a fairly difficult time. This is where whole of life costs become a factor.”

Working a sensible and cost effective fleet strategy in with green ideas and fleet choices is once again on the agenda, says Bell-Booth. “Fortunately manufacturers have responded to the global push for greater efficiency in vehicles and company fleet buyers now have an excellent selection of practical, economical vehicles that offer excellent value.”
“The issue is trying to get out of V6 type models but still fulfil corporate environmental options and retain good staff with attractive vehicles. The challenge for us – and it’s a good one – is to come back with a suggestion that ticks the box for all of them,” says Nicholson, who adds it’s interesting to witness the dynamics when a CEO, CFO, HR manager, and environmental officer get around the table to discuss their leasing requirements.

Smart reporting
The reporting aspect of vehicle leasing is one that’s often under-rated by smaller companies, says Nicholson. “Because getting bang for their buck is important one of the things we need to ensure is that they’re actually doing their contracted kilometres.” Tracking this is easier where their fuel cards are used, he says. “When a vehicle’s filled up we can give an accurate odometer reading and if they’re under, or over, we can recommend changes.”
Smart  reporting enables clients to focus on the overall impact of a vehicle fleet, “Not just the cost,” says Willmer. “They want to know how it’s being used, how many speed camera infringements their drivers are getting; they want to run a clean ship.”
Talk leasing company vehicles and ‘smart’ is a word that’s used a lot. And it’s about a lot more than an emphasis on the latest ‘smart’ technologies, says Willmer. “Smart is a number of things including evaluating who needs a car then looking at the type of vehicle that’s most suitable. We’re finding a more holistic approach than ever before; managers are a lot more conscious of what type of vehicles they’re putting staff into, whether the vehicle has a 5 Star ANCAP rating, and that’s fantastic. The safer the better.”

Driving the brand
Three years ago Auckland real estate firm Goodwin Property Management was looking to ramp up their marketing strategy in an increasingly competitive industry; part of the solution arrived at was supplying identical fleet vehicles for their property managers and business development team – and having those vehicles branded with the company logo alongside the name and contact number for the driver.
The process GM Catherine Goodwin then went through is almost textbook stuff.

Taking into account the different lifestyles of the individuals who’d be behind the wheel, she compiled a list of requirements, and sought the expertise of her professional advisers about the best option – buying a fleet of 12 vehicles or leasing them and outsourcing the complete management and maintenance of the fleet.
“Taking everything into account, the reality was that the cost of outright purchase was prohibitive.” Goodwin then began talking leasing. “Around that time I’d read a business magazine feature that discussed the concept and I recall ringing no less than four different advertised companies as well as going direct to brand suppliers.”   
Driver safety was a priority, particularly as the vehicles would be used by the employees families in their leisure time. Providing a vehicle that was representative of the Goodwin Property Management business, and would be carrying that brand, was another consideration. Then there was the fit-for-purpose aspect. “As a real estate firm we needed good boot size.” Goodwin also believes that providing a company vehicle is a compelling tool in the employment and retention of quality staff.
The result was an agreement with LeasePlan which Goodwin describes as, “fully comprehensive, ‘boots and all’, including general service and maintenance, warranting, registration, tyres, accident-care, insurance, everything! They provided multiple options and we were able to make a decision on type, brand, price, the lot.”
This comprehensive maintenance and management service means the fleet is not a burden on Goodwin’s admin team. “Rather than becoming a business that loses focus to maintain vehicles, we can concentrate on our core business. LeasePlan manages any issues promptly and very professionally, and that quickly confirmed itself to be another benefit of the lease process.”

With the initial lease period due to expire, Goodwin Property Management is currently assessing the company’s requirements for the next fleet of vehicles. Three years on, fuel consumption is a major consideration, and Goodwin says managers have indicated they’re prepared to forfeit vehicle size for greater fuel efficiency.
By branding a fleet of 12 quality vehicles, this mid-sized, privately owned family business has achieved maximum exposure, says Goodwin. Leasing those vehicles means they’re able to do what they do best – property management – confident their leasing partner is there to keep the wheels turning.