Money matters: whether purchasing, leasing, hiring or insuring a commercial vehicle, the one certainty is that there will be a cost implication. Neil Nixon looks at some of the options available to fleet operators
With changes to Benefit in Kind tax legislation only three years away, there is almost certain to be an impact on the buoyancy of the LCV market in the UK. There will be a large number of vans making their way onto the used vehicle market as operators downsize their fleets because staff no longer want the benefit of being able to use them for personal use. This certainly isn’t a reason not to purchase a new van but it should be borne in mind as it will definitely affect the residual value if used vehicle supply starts outstripping demand.
To add to the problem, everyone wants new vans these days. Operators are increasingly aware that the image vans and drivers create on the road speaks volumes to their customers, and consequently vans of just five years old are rapidly becoming a thing of the past. This puts pressure on the operators to acquire and dispose of commercial vehicles in the most cost-effective way possible. So what are the options?
Top of the pile is a straight purchase, whether it be a single vehicle or a fleet. Obviously, your bargaining power increases with the number of vehicles you are looking to buy, so try to manage your replacement programme in batches. Shop around for the best deals; light commercial vehicles are very clearly grouped, and there are many similarities between the manufacturers, so be sure to get the most for your money.
Cash purchases are, for obvious reasons, becoming less popular, with many operators looking to one of three alternatives: hire purchase, lease purchase and contract hire. So what are the differences and benefits of each?
Hire purchase: You will usually need to stump up a hefty deposit, but the balance can be spread across an equal number of monthly installments. The benefit is that you ultimately end up owning the vehicle, and so hire purchase consequently suits the low-mileage operator who takes good care of their vehicles. It will also suit operators who wish to run vehicles for longer than the normal three-year contract period.
The downside is the same as the benefit–you ultimately end up owning the vehicle! This creates the problem of disposal but, assuming your vehicle looks good for its age and has a below-average mileage, you needn’t worry too much. The other drawback is that you will have to maintain the vehicle at your own expense–maintenance contracts are rarely if ever available with hire-purchased vehicles.
Lease purchase: Basically, lease purchase is similar to hire purchase, although the monthly payments are lower. This is countered by the requirement to make a large final payment at the end of the contract period, and then you have the same disposal considerations as above. The cost of finance for lease purchase schemes tends to be a bit on the high side, so be sure to shop around for the best deal.
Contract hire: The most popular and easiest way of financing your commercial vehicle, this enables operators to run a vehicle to a set monthly budget, with no hidden extras–assuming you make use of the maintenance option. You will need to accurately assess your requirements before entering into a contract hire arrangement, particularly concerning annual mileage. Obviously, the higher the mileage, the more expensive the monthly contract–but it is essential to be honest with yourself at this stage. The penalties for exceeding the mileage you are paying for are horrendous!
Taking advantage of maintenance options rids you of hidden running costs as everything is covered, with the exception of insurance. All maintenance, tyres, windscreens and usually road tax are covered in the cost. The contract hire option, with added maintenance contract, will ideally suit the high-mileage operator who wants to operate to a set monthly budget without ever owning the vehicle, avoiding the problem of disposing of a high-mileage vehicle at the end of its life.
So there you have it–four options to get you on the road. But unless you decide to acquire your vehicle via contract hire, there are other issues that will impact upon the cost of the vehicle. Make sure you look into the residual value of each model and make at the end of the period you intend to use the vehicle for. Look at the fuel you are going to be using–if you go for any of the environmentally friendly options there may be grants or other incentives available. If you are operating in London, or in any other area that may be considering the introduction of a congestion charge, LPG-powered vehicles are currently exempt, saving you 8.00 [pounds sterling] per day.
Companies offering commercial vehicle insurance are not hard to find, but you should be aware of what you are looking for from your provider. The key insurance issues for a commercial van owner or operator are: getting the vehicle back on the road as quickly as possible following an accident or loss; managing cashflow; and peace of mind in terms of cover and service. While everyone focuses on price, you really need to consider whether you are getting value for money–so, as with finance options, shop around.
The other key points to consider when arranging insurance for your LCV fleet are:
* How good is the quality of service from your insurer? Does it give you confidence about its claims handling service?
* Do you carry a claims contact number in the vehicle? The size of the claim and possibly therefore your future premiums are directly impacted by the speed of notification. The more notice you give the insurer, the more chance it has to effectively manage the claim for you.
* Have you checked the size of the excesses on young drivers?
* Have you checked the detail of the cover? For example, most policies do not cover theft where the keys were left in or on the vehicle.
* If your vehicle is written off, will the policy continue when you replace the vehicle or will you have to start again?
There are many things a fleet manager can do to assist in minimising insurance premiums. These include: driver assessment and training, putting the emphasis on driver awareness and developing safe driving best practice; installing security equipment, including alarms, immobilisers, deadlocks etc; and ensuring that vehicles are parked safely and securely at night. Many insurance providers offer comprehensive protection, specifically tailored to meet the needs of commercial van drivers. Take your time to consider the alternatives. Any broker will be able to advise you on what is available, and what your legislative responsibilities are–in terms of your vehicle, your driver and other road users.
Whatever your requirement–finance or insurance–the choice is enormous. Set out your list of priorities from the start, and seek to find the solution that meets them, or at least the most important ones. The cost of selecting the wrong option is considerable, particularly in terms of finance and, in many cases, there is no way back once a contract is underway. Penalties for terminating the ‘wrong’ contract early will only add salt to the wound.
VAN HIRE PROGRAMME FROM RENAULT
As pictured above, Renault has launched a new van rental programme across its UK dealer network–called Renault Rent. Available to all of Renault’s 220 dealers, the new initiative is now fully operational at three of the company’s sites–in Croydon, Wolverhampton and Oldham–with the aim of having 50 Renault Rent branches by 2006.
In addition to boosting local awareness of Renault’s LCV range and the dealership concerned, the new programme brings with it a range of other benefits including improved service for new and existing customers, greater ‘test drive’ potential, as well as increased used LCV stock for the dealer.
Hire periods available range from an overnight rate to longer-term bookings for corporate users. The rental tariffs are described by Renault as ‘extremely competitive’, and include the option for customers to arrange collection and delivery, making the hire process even smoother and easier.
Jonathan Darke, manager, UK Rental, Renault UK, comments: “The UK’s van rental market has taken off in a big way in recent years, and we believe that, as Europe’s largest light commercial vehicle supplier, we are ideally positioned to respond to this rising demand. We plan to have 10 UK dealers operating Renault Rent by the end of this year, with a further 40 centres rolling out across the network over the next two years.”
To set the Renault Rent branches on the right track, Renault UK will be offering day-to-day operational support plus a comprehensive start-up package providing all the support and materials required to operate the new service effectively, including point-of-sale displays, local press advertisements, marketing plans, network and IT system training. In addition to such marketing and training assistance, Renault UK will also be making a number of options available to the dealers for establishing their van fleets.
TOP 10 TIPS FOR SECURING THE BEST RENTAL FLEET FOR YOUR BUSINESS
TLS operates one of the UK’s largest commercial vehicle hire and rental fleets, renting commercial vehicles on a short and long-term basis to sole traders, small to medium-sized businesses and multinational corporations through a nationwide network of branches and its association with other GE Equipment Services businesses worldwide.
Businesses benefit from off balance sheet financing and can maximise their fleet flexibility by adopting a ‘usership’ approach rather than traditional ‘ownership’. In addition, vehicles are backed by round-the-clock service from a team that fully understands their business and the vehicle issues associated with it.
TLS offers the following as its top 10 tips for securing the best rental fleet for your business:
1. Flexibility: More and more businesses in the UK are looking for flexible terms when it comes to acquiring expensive assets such as commercial vehicles. Many rental companies have begun offering products that can be a truly practical alternative to contract hire. See if flexible rental, like TLS Advantage, would be better for your business before you make a long-term commitment.
2. Take the weight off your shoulders: Make sure that the company that’s dealing with your commercial vehicle needs can do the hard work for you, whether that is maintenance, road tax, emergency breakdown or compliance.
3. Shop around: While most rental products are broadly similar, each supplier will have their own specific product offerings. Make sure you spend time to find a tailored deal that suits your requirements.
4. Quality of service: Look to your supplier’s pedigree and history to ensure you are getting a high quality of service from a company that you can trust. Make sure that you’re offered a full support package including easily accessible customer service, breakdown assistance and vehicle replacement.
5. Quality of vehicles: Find out what your supplier’s replacement cycles are. Some vehicles are rotated every six months while some can be every five years. A rental fleet focusing on a two to three-year replacement cycle will give you the best balance between modern vehicles and the inconvenience of regularly changing vehicles.
6. Availability: Find a company that has a nationwide network of branches that can offer local services that your business will need, whether that is vehicle delivery and collection, or access to large fleets.
7. Avoid extra costs: Some companies insist on a long or fixed-term contract and have significant penalties for early termination of your agreement.
8. Usership: Fleet managers know the costs and risks of ownership. Where it makes financial sense, find a supplier that takes all the risk in terms of maintenance and future residual values, so you can focus on ‘usership’ not ‘ownership’.
9. Be prepared: Regardless of the size of your fleet, it’s important to be prepared for all eventualities. Ensure that the company that you deal with can offer you a full breakdown and recovery package that can get you and your business back on the road and, if necessary, have replacement vehicles on standby.
10. And finally: the most important tip, make sure that you’re fully prepared and have explored all avenues before committing to any agreements. Getting out of a bad contract in the future may be both tricky and costly.
SETTING ‘HIRE’ STANDARDS
Commercial vehicle rental firm TLS has teamed up with Mercedes-Benz and added a new model to the TLS offering for fleet managers. This investment will see Mercedes Sprinters join the TLS fleet.
Andrew Way, chief executive of TLS, says: “We’re delighted to now be able to extend our Mercedes offer to customers. Our general choice was driven by quality of product, recognition within the market and best-in-class status. The Mercedes marque allows us to set ‘hire’ standards for our customers through improved vehicles that offer ESP, ABS, ASR (Anti-slip regulation), BAS (Brake Assist) and EBD (Electronic Brake Force Distribution).”
The new vehicles are available as part of the TLS Advantage package, which features no mileage restrictions and no early termination penalties and is available on a wide range of light commercial vehicles.
Peter Lambert, sales & marketing director for Mercedes-Benz Vans in the UK, comments: “The demands of end users in the rental business are constantly increasing and this order is a reflection of that trend. TLS is clearly well aware of this and is buying a premium brand to satisfy its customer demands for high-quality vehicles. I am particularly pleased with the partnership that we have developed with TLS, which has ensured that its field teams are thoroughly briefed on the Sprinter product advantages. This will help it to meet its customers’ high expectations.”
VW LCV INSURANCE–FROM VW
Volkswagen Commercial Vehicle Insurance has recently been introduced to, in the words of VW, “balance competitive premiums with a high level of service and benefits”. This latest service also gives customers the opportunity to obtain all their motoring-related finance and insurance products from one source–their local Volkswagen Commercial Vehicles Van Centre.
Volkswagen Commercial Vehicle Insurance is available to owners of new and used vans, and offers a range of features:
* Access to competitive quotations from a select panel of insurers, ensuring a high standard of cover.
* Quotations tailored to the individual’s needs or to the requirements of fleet operators.
* Free assistance with the recovery of uninsured losses, with cover for legal expenses up to 50,000 [pounds sterling] incurred while pursuing such losses.
* Access to an accident and recovery helpline, 24 hours a day, 365 days a year.
* Easy and convenient payment methods, including Direct Debit.
Further discounts on premiums can be achieved by restricting named drivers, opting for additional voluntary excess and having an insurer-approved immobiliser fitted.
For a quote call 0870 752 4910 (national rates apply) between 9am and 5pm Monday to Friday or 9am to 1 pm on Saturday. By answering a few questions, customers will receive an immediate quotation. Alternatively, any Volkswagen Van Centre will be able to arrange a time for customers to discuss their requirements with Volkswagen Commercial Vehicle Insurance.
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