01 April 2020
Fleet Guidance to help fleet operators manage through these challenging times from Fleet Logistics UK
During the Coronavirus crisis, advice on maintaining continuity, reducing operating costs and, above all else, keeping drivers safe, will be crucial to UK fleets.
Timely advice comes from the Birmingham-based fleet management specialist, Fleet Logistics UK and Ireland (FLUK), the UK arm of international fleet management provider, Fleet Logistics, which has around 180,000 vehicles under their care.
FLUK has identified some initial areas for businesses to consider and act upon with many in lockdown or operating at reduced capacity.
- Look into contract extensions
Fleets should consider asking their leasing company for informal or formal vehicle contract extensions, rather than returning vehicles at the end of contract and replacing them. The leasing companies are ready to offer support to both their business and personal clients.
An informal extension would only apply to vehicles coming to the end of their contract. These vehicles may be extended on a month-by-month basis while the crisis lasts. This delivers flexibility at the current lease and maintenance cost, without any disruption for drivers.
For businesses able to commit short term, formal extensions of typically 6 or 12 months should be considered. This provides ongoing monthly budgeted costs for both finance and maintenance costs. As contracts are being extended over a longer term, monthly rentals are reduced. This approach is likely to be supported by the leasing company as it provides them with continuity of income.
Consider keeping vehicles registered before April 6th that impact less on both Benefit in Kind tax for drivers and Class 1 NIC costs for the business. Also, remember that vehicles with less than 110g/km of CO2 are not affected by the lease rental restriction, meaning 100% of their leasing costs can be offset. Your fleet management provider will be happy to discuss these points in more detail.
- Consider contract re-writes
There may be major savings to be had from re-writing contracts based on accurate actual mileages for each driver. This is particularly relevant to fleets still writing contracts on benchmark parameters. Take, for example, a typical 36 month/20,000 mile per annum contract where drivers may only be driving 10,000 miles a year. By reducing the contract mileage to 10,000 miles per annum, this will result in lower costs to the leasing company, meaning lower rentals and maintenance costs to their clients. During lockdown, most vehicles will be off the road, meaning this year’s mileage may be even further reduced.
Businesses, or their suppliers, should identify those under-mileage drivers and the contracts that can be re-written, as the savings can be considerable. This applies even in a pooled mileage situation where contracts can be rewritten to reduce any overall surplus in fleet mileage. If in doubt, talk to you fleet management provider or leasing company.
- Avoid early terminations
Early terminations incur a penalty charge so should be avoided if at all possible. If no other solution can be found, return vehicles close to the end of their contracts to minimise the charges. Investigate, if possible, re-allocating or swapping vehicles to different parts of the business, or between drivers, to avoid these potentially punitive charges.
- How to treat short or mid-term rentals
Currently, rental vehicles are classed as an essential service and provide the ability to source vehicles quickly if needed. Key services are prioritised so turnaround times may be affected unless your business falls into this category.
If there are now surplus vehicles on your fleet, consider returning short-term rental vehicles first. They offer flexibility; however, they also represent an often more expensive mobility option and can usually be returned without penalty.
For instance, where there are new employees, who may be waiting for delivery of their company car, look to surplus pool vehicles first or to leased vehicles near their contract end date, as these may be informally or formally extended as described above.
Again, your fleet management provider can provide advice on this.
- Tackle your fuel bills
With the collapse in world oil prices and fuel cuts at the pumps, this is a good time to renegotiate fuel prices being paid, especially fuel that is being bought in volume.
Fuel is the largest day-to-day operating cost on the company fleet and often businesses lack control over the price paid. Even supermarket pricing, typically the cheapest retail purchasing opportunity, can be more expensive than a negotiated corporate deal on a set weekly rate directly with the source. It is worth investigating options.
For fleets with fixed term fuel contracts, or in the process of tendering for them, different options, such as hedging or capping which are typically relevant to large commercial fleets, could provide certainty over fuel spend and help when projecting costs over a fixed term. Hedging is a contractual tool that large fuel-consuming fleets can use to reduce their exposure to volatile fuel prices. Your fleet management provider can again talk you through the options.
- Managing servicing, maintenance and MOTs
It is important to ensure that vehicles are maintained, serviced and MOT’d for driver and public safety, and in line with manufacturer warranties to preserve cover. However, last week, the Department for Transport announced a six-month exemption from MOT testing from 30th March 2020, allowing workers to carry on with essential travel and to help stop the spread of Covid-19. Vehicles must still be kept in a roadworthy condition.
Businesses should set up reminders to ensure those drivers that require servicing or MOTs to be carried out when normalcy return actually have the work completed. This will ensure they meet their duty of care obligations in ensuring their vehicles are fit for purpose and warranties remain unaffected.
Sue Branston, Country Head for Fleet Logistics UK and Ireland, said that in these challenging times, there is the opportunity to make changes that will allow businesses to run their fleets more cost-effectively and efficiently through this difficult period as well as in the future.
"We are working with our clients to reduce their running costs, re-write their contracts using our matrix leasing solution and cut their fuel bills, as well as costs in other areas of their supply chain. These changes will support clients to run more cost efficient fleets in the short term as well as when we all get back to normality.
"In these unprecedented times, it is important that every element of the fleet supply chain comes together and works in everyone’s best interests. And we are encouraged by the many examples of this happening at the moment,” she said.
“My team are available to help answer any questions or provide guidance to any business requiring support, client or not. We are here to offer help to any business that needs it now,” she added.
For more information please don’t hesitate to get in touch:
Birmingham Business Park
+44 121 717 1060