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How to get the right business vehicles at the right price

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The world of business vehicles can be difficult ground for the uninitiated, with owners needing to keep costs under control while ensuring they have reliable vehicles that project the desired image. David Adams explores the various twists and turns

Depending on the type of business you run, the vehicles you use could be crucial to your success. Many small businesses decide the best way to meet their vehicle requirements is simply to buy what they need, or to use vehicles already owned by staff members.

But buying one, two or even three vehicles outright is unlikely to be the most economical option. And relying on vehicles that you or your colleagues already own – running a so-called ‘grey fleet’ – may bring additional costs and risks.

The 14 million grey fleet vehicles thought to be on the road in the UK are on average over eight years old, and thus less cost-effective, perhaps less reliable, and often more polluting than newer vehicles, according to research from the British Vehicle Leasing and Rental Association (BVRLA).

Although BVRLA members would clearly benefit from a reduction in grey fleet usage, it is difficult to argue against the points they raise. Often, grey fleets work out as more expensive, and are less rigorously managed, than would be the case if a formal fleet management strategy were in place.

Another administrative headache with grey fleets is ensuring every staff member has the correct insurance arrangements for using their vehicle for work.

In addition, firms are unlikely to closely monitor the accuracy of employees’ mileage claims.

Although in some cases this informal model is still the right option, for many businesses it is worth considering alternative ways to get the wheels you need onto the road.

The lure of leasing

Warren Purchase, Senior Partnerships Manager at FSB Vehicle Services, believes outright purchase is becoming a less favoured option for many smaller businesses simply because cars and vans are expensive. Instead, many are now choosing to lease vehicles, which can result in lower costs, as well as some tax advantages.

FSB Vehicle Services can provide advice on quotations already received elsewhere; and on topics including tax breaks for different leasing deals or vehicles – particularly for vehicles with lower carbon dioxide emissions. Members can also access a range of different leasing packages and even buy vehicles outright.

Marcia Gomez is owner and Managing Director of Cotels Serviced Apartments, a swiftly growing company that manages flats for business travellers and some longer-term tenants in Milton Keynes, Northampton and Luton. She has worked for the company since 1997, but bought it from its previous owner in 2009, when she began a new growth phase, adding to the company’s portfolio and expanding from its original Milton Keynes base.

In 2009 the business purchased two second-hand vans, used largely to transport laundry, furniture and housekeeping staff and materials between its different properties. In 2016, Gomez decided the time had come to move to a leasing arrangement, through FSB Vehicle Services.

“The old vans did OK, but they were costing a lot when they went through the MOT,” she says. “It’s also about looking the part – we’re a branded business and we want the vehicles to look good. With leasing, they’re brand new – we’ve got all the servicing and everything included, and we’re presenting a better image.”

In early 2016, Cotels signed a three-year leasing deal for two new vans, and has just taken delivery of a third vehicle – a Citroen C4, to be driven by the company’s Sales Director. “We’re paying an extra £15 a month or so to include all the maintenance,” she says. Leasing means no unexpected costs, she adds. “You know what you’re paying each month, and you know it’s all sorted.

With the old vans, we had a couple of incidents when they broke down, and the problem of getting them fixed and coping without them. By moving to leasing, you escape all those things.”

Avoiding the potholes

There are some pitfalls to avoid. As with any contract, look at the small print and be honest when setting up the deal with a leasing company. If you breach the mileage agreement without informing the leasing company, you will usually be charged an additional fee. Problems can also arise if the vehicle is not returned in decent condition.

It is also important to ensure all the fine details are correct when it comes to arranging insurance. Arguably, the most important issues are how the vehicle is used and who will be driving it, says Darrell Sansom, Managing Director at Axa Business Insurance.

Problems sometimes arise if business owners use the vehicle to do favours for friends and family, he says. For example, any contents in the vehicle will probably not be insured under a standard policy when the vehicle is not being used for business purposes.

Business owners should look carefully at policy terms and conditions, rather than just making buying decisions based on price, suggests Mr Sansom. “Price is important, but make sure you check the excesses and any conditions that apply to the policy,” he says.

It’s also important to keep your insurer or insurance broker up to date with any changes that could affect your insurance, such as the creation of a formal fleet-management programme, he adds.

Some insurers now offer improved conditions to companies, using telematics technology to monitor driver behaviour. Such systems are increasingly affordable, and can often be controlled using smartphone apps.

They can record how efficiently drivers drive, monitoring speed, mileage and whether vehicles are accelerating or braking quickly. Some leasing companies are also off erring telematics services.

“The ongoing development of apps means it will become easier for people with smartphones to do this, which means anyone can do it,” says Toby Poston, Director of Communications and External Relations for the BVRLA.

Finally, it’s a good idea to keep an eye on technological developments related to vehicles in general. Self-driving business vehicles may still be a few years away, but we are likely to see more electrical and hybrid vehicles on the road in the near future.

Adoption of these vehicles is being driven by Government incentives, particularly on tax; by the technology distances over which they can be driven without being charged.

Whatever type of cars or vans you need, it is worth dedicating some time and effort – just as with anything else in business – to trying to find the best possible deal, for a vehicle, or vehicles, that you know you can rely on.

DAVID ADAMS is a freelance business journalist

 

Bye-bye buying

For those who no longer wish to own their vehicles, there are several options to consider:

CONTRACT HIRE

In effect a long-term rental agreement, entered into as an individual or as a business. You pay a fixed monthly sum to lease a vehicle over a fixed period. Some or all of the servicing and maintenance, emergency breakdown cover, road tax and insurance can be included. If you are VAT-registered, you can claim up to 50 per cent of VAT on finance payments and 100 per cent of maintenance agreement costs.

CONTRACT PURCHASE

Again, a long-term rental agreement, which may also include service, maintenance and other features, but here you can buy the vehicle from the finance company at the end of the contract. A minimum guaranteed future value is calculated: the ‘balloon payment’ to be paid if you want to purchase the vehicle at the end. This can be paid at that time, or spread across your monthly payments during the contract.

SALE AND LEASEBACK

With this scheme, you sell your existing fleet to a leasing company, and then rent the vehicles back. Service and maintenance plans may also be available.

EMPLOYEE CAR OWNERSHIP

Often complex to administer, these schemes suit companies where many employees use the vehicles a lot and continue working for the firm for a long time. Employer and employee share fixed monthly payments, but ownership of the car ultimately passes to the employee

CAR-CLUB MEMBERSHIP

Employers can use services from rental and leasing providers that offer access to vehicles on demand. Services available include vehicle management and maintenance, and access to telematics data on driver performance