The more your business grows with exponential demand of vehicles its gets more resourceful and can steer your focus away from the core business operations.
If your business is highly dependent on transportation of goods or reliant on your staff being able to commute on a regular basis, then fleet management must be a core aspect of your business model and growth plan.
The financial aspect of having a fleet is also very from a business funding perspective and we will look at how contract hire and leasing can be a more manageable and cost saving way to managing a fleet of vehicles.
In this article we highlight some of the important elements of managing your fleet and the options that are available for you to consider.
The main advantage of the more conservative approach of managing your own fleet is that you have some level of control but not total control unless you have your own repair and servicing facilities which itself comes at rising costs with regulations.
The level of control that your business would practically achieve will come at the expense of employing a dedicated fleet manager who would essentially be the point of contact for your drivers when there’s anything to do with the vehicles and analysing the everyday needs of the business with the pressure of reducing costs at every point possible.
This person will then most probably have to source the best deals on vehicles and develop relationships with external bodies which would provide a service relevant to you needs and this may be a pool of resources.
This sounds like a task that you could easily outsource at a proportion of the cost.
The modern approach of delegating less beneficial tasks and reducing operating costs of a business by outsourcing a level of responsibility in the hands of experts who deal with common tasks on a daily basis outweighs in-house management.
By all means your business may need to establish a point of contact to deal with a fleet management company. However, they wouldn’t take up much of their time except more near the time when renewals are due and alternatives are to be considered or an issue arises requiring further involvement such as road accidents.
The other benefit of outsourcing fleet management with maintenance contracts is that you won’t need to put up with the hassle of smaller issues and if you have a question or need some advice you can pick the brains of your dedicated account manager.
Unless you’re a logistics or a vehicle rental firm It is very rare to find SME businesses that purchases their vehicles outright. This is because of two key reasons.
The first is that you don’t have to invest large amounts of money to develop your fleet so you could utilise this funding in other key areas of your business with the intentions to bring back a return on investment. Additionally, freight bill factoring can raise the necessary funds to purchase additional vehicles in the future.
The second is to avoid the corporation paying heavy taxes on depreciating assets.
When you purchase a brand new vehicle it depreciates in value at the time you sign the dotted line and the first 2 years will see the largest proportion of depreciated value during its lifetime.
The alternative and increasingly popular option are to maintain your fleet on contract hire and leasing terms that’s essentially financing the depreciation value over the period of time you intend to use the vehicles.
Since the business is receiving some kind of benefit from these leased vehicles there are taxes applicable namely BIK tax that varies depending on the type of vehicle the business is using. Most leasing companies will advise on the BIK tax rate that is stipulated on vehicles that are leased for business use.
Money saving tips
- Your business does not have to pay non-claimable VAT and BIK taxes if the vehicle is leased on personal contract hire by a dedicated driver of that vehicle. Depending on your business type or model it may be beneficial for your employees or contractors to take a personal lease so they can use the vehicle during business hours and for personal use. The company can pay for the amount of mileage rendered for during business hours as travel expenses.
- By including greener hybrid vehicles with low CO² emissions could save you a great deal on BIK taxes and give you more mileage for less which would directly reduce business operating cost and may help increase profits or provide more funding for the business to invest and grow.