To lease or to buy those company vehicles – Sean Willmot weighs up the pros and cons of either option.
With the rising cost of fuel presenting issues for businesses running fleets of any size, now might be a good time for your (ahem) fleet manager, to consider how cost effective the fleet really is.
It may well be the best time to start looking at replacing or upgrading some of the vehicles which are proving to be a little thirstier than when they first came on the fleet, maybe three or five years ago.
The technology that’s hit the automotive market in that space of time is impressive, and the leaps forward in fuel saving advancement are positively eye-watering. There was a time when hybrids were the only vehicles capable of achieving sub-seven litre per 100km fuel figures; now you can get medium to large SUVs to do that, and better.
And let’s not get started on the safety devices and systems!
So, if for no other reason than to upgrade the fleet to a melange of modern misers when it comes to fuel, you might want to start at the beginning and ask: should we buy or lease?
You could buy, and most car companies would love you to.
Buying gives you the warm fuzzy that comes with vehicle ownership. You’ve started your company, or you’ve built it the way you want, and when it comes to vehicles, you’ve decided what you like/want/need, then gone out and got it. You probably did quite well, getting a killer price too.
You’ll have retained effective control over your fleet and all that this entails: responsibility and accountability for supplying drivers with the safest and most fit-for-purpose vehicle, administration re WoFs and regos and those pesky speeding infringements, servicing, accident management, depreciation and taxation issues… and everything else.
It also means you are using capital to invest in an asset and presumably, you’re prepared for the day that you realise the asset will become a ‘significant’ liability as a result of depreciation and in some cases, abuse through carelessness or accident – and you have a plan to weather the cost of selling and replacing at the right time.
Or you could lease – which, when compared to the above, really starts to look attractive.
Today, more than ever before, leasing is a popular option: you have access to the latest vehicles, the ability to do what you set out in business to do – as opposed to committing resources and time to tame the fleet monster – and, of course, you have the variety of lease providers from both traditional independent lease companies to the direct leasing opportunities afforded by auto distributors, to partner with.
The finer points of lease arrangements with this last group vary between brands, so the smart money would do some extensive homework, call it due diligence, as it amounts to the same thing.
If you are dealing with the more traditional lease companies, it’s sound practice to do the same thing, just as it is worth your while ‘shopping around’ – for two reasons: the first being that today’s fleet leasing companies do want your business and they’re more attuned to meeting the customer’s needs than ever before in order to secure it, giving you a greater ability to arrange a lease arrangement which benefits you; and the second being more along the lines of ‘keeping them honest’.
Elaborating on the first point, leasing organisations are much more open to finding a solution that works for you, giving you quite a bit more flexibility in vehicle selection, and at the same time, opening your eyes to the increased range of services they have to offer. You may be very pleasantly surprised at what can be done today, with technology and novel approaches to leasing outside of the simple ‘maintained’ or ‘non-maintained’ lease options.
Then there’s the honesty thing. It’s true that leasing today is becoming much more transparent too, which was not always the case. There was a time when dealing with a lease company was akin to wrangling your way through a multipage legal document where every second word had no less than five syllables, usually written in letters resembling ant tracks on a page.
Today, going through even a detailed leasing proposal can be done over a coffee, with the biggest word being ‘mochaccino’. It’s still worth your company’s time to make sure you fully understand everything that’s contained within a lease agreement though, particularly on the subject of servicing packages – what’s covered and what’s not – and end of life disposal and refurbishment.
Today, the fine print is not as fine as it was, but attention still must be paid to it, and because each player in the market is the same-but-different, make sure you are comparing like-for-like before you commit.
For most companies, the greatest area of concern when it comes to leasing – outside of retaining control of your fleet, of course – is going to be the all-important bottom line.
Yes, the finance side always rears its ugly head and for many, organising a lease arrangement is like getting changed in public, you don’t really want to show everyone else everything about you — or in this case, your business.
You will have to reveal some things about your financial affairs, however, as it would be a very foolish lease company to not perform – as a minimum – simple credit checks. They do have to protect their interests after all, but the information gathering is done to give the leasing company a clearer picture of how they can tailor their services to suit your needs.
There’s nothing to say that you can’t ask the lease compa nies to present what they see as ways of improving your bottom line through their products either. In fact, it’s a great idea to do so.
Well, only you know the ‘ins and outs’ of your fleet requirements and, therefore, you are the best person to determine if leasing or buying is the best option for your business.
If there is one piece of advice though, it is this: be open-minded as well as careful.
Whichever fleet option you choose, it can and will have a lasting impression on your company’s bottom line.
Keeping track of your vehicles
GPS-enabled vehicle tracking technology has become far more sophisticated in recent years.
However, Jeremy McLean, director of Sensium, says the industry as a whole has become considerably commoditised.
“We’ve seen a ‘race to the bottom’ with pricing,” he explains, “but that’s also resulted in a reduction in quality, features and future development opportunities.
“However, Sensium has taken a different approach to most other service providers in the industry, as we are developing features to add value to our product.”
McLean says the fact that many fleet managers are now deploying GPS tracking is a major positive step. However, there are a couple of things to be aware of, he says.
“All hardware must be RCM approved. Failure to have RCM approval can see fines of up to $20K per offence. The process ensures electrical safety, radiation tests and telco approval.
“Also, ensure your data is safe – that means encrypted end-to-end.
“Most [GPS tracking] products in New Zealand ‘ignore’ these two very important features in order to provide cheaper products.”
The ‘proof is in the pudding’ when it comes to top-end vehicle tracking systems. McLean says in Australia they’ve just closed their biggest deal, involving more than 2000 devices, with potential of that again in the US and Canada. “They chose our product over many others they were evaluating, based on the quality and integrity of the data we collect. It allows them to ‘do more’ with the product, he says.
As for the future of GPS vehicle tracking, IoT (Internet of Things) is being embraced too.
McLean says Sensium is currently developing hardware for the new CAT M1 and NB-IoT networks. This opens up a much bigger market, with lower costs but also much better functionality.
“NB-IoT allows us to build hardware with a much greater battery life of up to five years without charging. We will have the perfect products to manage vehicle fleets, and plant and equipment,” he says.
Sensium is also currently rolling out a lot more functionality around driver behaviour, McLean adds. “The way we have built this is world leading – we don’t just accumulate a count of time a vehicle has breached a pre-set threshold. We collect data and calculate G-force continually while a vehicle is travelling.
“We can then show maximum G-force, work out averages, and so on – which gives an accurate insight to our customers’ vehicle usage.
“We have also just released Heatmaps; technology that allows a customer to view an entire month’s vehicle history in a simple map view.”
Reading the cards
Service stations no longer operate fuel accounts, and having your employees buy their fuel, then claim it back, or use a company credit card, presents all sorts of challenges around admin and trust. Fuelcards are the obvious answer, and while choosing between the various card providers is still predominantly about the discount, the discerning professional buyer needs to ask the question – what about the price? What is the discount from?
As Mobil Fleetcard manager Glen Wallis points out, not even off-pump discounts are a good comparison, as the base price before the discount is applied can vary.
“Don’t forgot about those card and transaction fees either – they soon eat away at any discount you may receive.”
Once a business has chosen a fuelcard the secondary issues become key issues, he adds. What are the security measures around a card? What security features does a card have? What control does a business have over staff purchases at remote payment terminals? And what integration does the card have with business systems?
Interestingly, this year Mobilcard has been leaving less to chance and less to the customer’s own administrative capability and knowledge of how to operate fuelcards. All Mobilcard security features now have default values with actual purchase, daily purchase and monthly purchase limits, says Wallis, as well as authorised product capability available in-store and at remote payment terminals.
His advice is to talk it over with them. “We can set you up with a direct Mobilcard or advise you of a Mobilcard reseller or industry affiliated membership group who could meet many of your business needs, as well as well-priced fuel.”
Today, customers are demanding control of their expenditure but don’t want to spend productive business time pouring over invoices to do it, says Wallis. “They want transparent pricing available everywhere; to tell us what their control limits are and leave us to do it for them.”
He reminds business owners that rather than have direct fuel accounts, some good services around fuelcards can be provided by industry associations, resellers and your lease car supplier, utilising the bargaining power of many.
“Continue to monitor your fuelcard purchases; ensure any cards that aren’t used are cancelled rather than being left around exposing them to possible misuse,” he advises.
“Consider custom-made transaction limits and security features for each cardholder – allowing them to purchase only what you wish to pay for.
“With Mobilcard you can make the right choice for your business.”