Last week I spent some time selling the benefits of bangernomics, proving that it’s possible to run a reasonably luxurious and reliable car for less than the cost of a trip to Alton Towers. Of course, if you’re a fleet manager under pressure to reduce costs then bangernomics probably isn’t a viable option.
The line of BMW 320d SEs parked outside are a very visual reminder to the directors that £28,000 each is being shelled out for the staff to drive round in comfort. The two year lease deal signed on them could easily be extended to three, maybe four years.
It’s gone on at a lot of companies so far and it’s still happening, as it’s an obvious quick fix to reduce costs. Isn’t it?
Frankly, no. I’m talking from personal experience here and I admit that my own circumstances may not reflect precisely those of every reader here, but I’d hazard a guess that it’s not going to be too far off.
The first issue my old company faced was an unexpected increase in the lease cost. As the cars that were due to be handed back at two years had to continue running for another two, they were naturally going to do twice the mileage. That means we’re handing back cars with 140,000 miles on the clock as opposed to some with 70,000. Resale values on cars with more than 100,000 miles go through the floor and that extra depreciation has to be factored in by the leasing firm.
Secondly, these higher mileage cars needed more maintenance. As well built as most cars are, parts do simply wear out. Suddenly brake discs, clutches and suspension pieces were required where they previously would have been safely ignored.
And then there’s staff morale. Company car tax can cost an employee a lot of money. In the case of the BMW 320d SE, around £2,200 a year. It’s compulsory for every company car driver to complain about that cost, but the complaints get very real when they’re paying that money for a tired, high mileage four year old car with sagging seats, rattling trim, parking dents and more. The promise of a better deal might just sway your best staff to move on.
There’s then the prospect that the directors see the increased costs, see the fuel bills continually rising (petrol isn’t going to get any cheaper and old cars don’t suddenly become more economical) and wonder what went wrong.
As is the case in most areas of business, working smarter is better than working harder.
There’s a reason the BMW 3 Series sells so well, not least because it’s a very impressive, capable car. The outgoing 320d returned 49 mpg with road tax at £170 per year. The new 320d SE returns a much more impressive 61 mpg with road tax at £30 per year.
At £1.48 a litre for diesel, that’s a saving of £1,084 per car per year in fuel and tax alone. Make a smart switch to the EfficientDynamics range and those savings increase to £1,491 and there’s also a 100% writing down allowance in the first year.
Suddenly keeping the old cars doesn’t seem such a good idea, but it’s possible to go much further.
Take a look at the Peugeot 508. Yes, I know Peugeot hasn’t had much success in the fleet market, but the 508 is a significant step change from the French company. Granted, it’s not got the image of the BMW, but it’s a remarkably comfortable and sophisticated place in which to spend three hours on the M1.
The e-HDi models return 67 mpg and put out just 109 g/km of CO2, so the savings on fuel and tax are within a whisker of the BMW 320d EfficientDynamics, costing about £50 a year more and still benefitting from the increased writing down allowance. However, lease costs are massively reduced, with the Peugeot costing businesses a little over half that of the BMW.
Selling the idea to your employees shouldn’t be too much of an ask either. A four year old high mileage car or a new French cruiser? Not enough to endear your sales force to the idea? How about mentioning the company car tax bill will drop from over £2,000 to a much more reasonable £1,300?
Think even further outside of the mainstream and there’s a world of options that look attractive. The Kia Optima is every bit as good as any Insignia or Mondeo and there’s a forthcoming hybrid version to add to the mix, there’s the loosely related Hyundai i40, the Audi A4 based SEAT Exeo still retains that Audi quality, or even the MG 6.
On second thoughts, maybe not the MG 6.
Switch and your company can save multiple thousands a year per car while the employee gets more money in their pocket. The only loser in the arrangement is the tax man, but he’ll undoubtedly find ways of clawing that lost revenue back elsewhere. As he always does.
[button link=”http://www.contracthireandleasing.com/car-leasing-news/cutting-company-fleet-costs-weekly-column/” rel=”nofollow” color=”orange”]This article was first published at ContractHireAndLeasing.com on 4 May 2012.[/button]