Businesses looking to reduce their vehicle emissions and increase numbers of electric vehicles should consider a mix of funding options for their fleet.
That’s the advice of Mary Dopson-Taylor, Customer Services Director of Grosvenor Leasing, who says it’s never been more important for companies to widen the scope of vehicle funding than during this important shift to greener driving.
“When you look at vehicles being used for business travel, they often fall into various categories,” said Mary.
“You have company cars that could easily be replaced with fully electric models because the drivers have access to vehicle chargers, are not driving very high mileages and are not using their cars for any specialist activity.
“You then have vehicles that are currently more difficult to swap to electric, perhaps because suitable models aren’t available to meet the driver’s job role, they are regularly being driven very high mileages, or have limited access to charging.
“Then there are the grey fleet cars, where the company cannot control the choices drivers make. Research shows that the average age of grey fleet and cash allowance cars is older than both lease cars and those funded through a salary sacrifice scheme, and the average fleet car is far cleaner than its cash allowance counterpart.
“For most companies, this scenario will be very familiar and our advice, therefore, is to look at a number of different funding solutions to facilitate the ultimate goal of achieving zero emission business travel.
“Let’s start with drivers who use their own cars for business travel. From a funding perspective these are usually seen as being outside a company’s remit. However, there are options to help make your ‘grey fleet greener’!
“For example, a salary sacrifice or personal leasing scheme can help encourage the uptake of new, ultra-low emission and electric vehicles.
“By sacrificing part of their salary for a plug-in hybrid or fully electric car, employees can not only make tax savings but also enjoy fixed cost motoring with no deposits, maintenance or residual risk or credit checks. It’s for this reason salary sacrifice is surging in popularity while tax rates are so low on PHEVs and BEVs.
“A personal contract hire scheme can also be offered to employees, and our PCH scheme has grown significantly in supporting companies offering cash in lieu of a company car.
“The problem many companies face is that as drivers opt out of the company scheme and choose a cash allowance instead, employers end up handing over an amount of money every month with no control over how it is spent.
“That money is clearly meant to be for the individual to fund a vehicle that enables them to continue to do their job, yet it often ends up being used for other things leaving the employee with a vehicle that’s old, poorly maintained or not fit for purpose.
“That then creates a growing grey fleet problem, and also results in employees driving on company business in older, higher emission vehicles.
“By offering a well-promoted PCH solution, drivers will be more inclined to use their monthly allowance to fund a new car. This has advantages for grey fleet management and it encourages drivers to opt for new, low emission cars that not only improve the company’s overall green credentials but also create the right impression when travelling to meetings.
“Now if we look at the company vehicles, contract hire is by far the most popular funding choice as customers seek fixed cost budgeting for the growth of electric vehicles.
“Because electric vehicles are still a relatively unknown quantity, we’re seeing very strong demand for contract hire with companies not wishing to take the risk on things like depreciation and running costs.
“It means businesses can operate a growing fleet of electric cars and vans with fixed cost budgeting and no nasty surprises and, for companies that currently own their vehicles, a sale and leaseback is a great method of converting quickly to contract hire.”
A company that did this ahead of their switch to electric vehicles is Salvation Army Trading Company.
They were looking to future-proof their fleet with improved efficiencies, better budgeting and professional fleet management and their decision to sell their owned fleet to Grosvenor as part of a sale and leaseback was all part of a strategy to move to greener vehicles.
Chris Bentley, the Salvation Army Trading Company’s Fleet Manager explained, “Grosvenor Leasing quickly valued our vehicles based on their age and mileage as well as providing us with contract hire rentals to lease each vehicle back to us.
“This gave us a cash injection, which is always beneficial in supporting the important work we do but, more importantly, it improved our overall fleet funding and management solution in one transaction.
“With no disruption to our drivers we began benefiting from fixed monthly costs, a removal of risk, less administration and access to a range of additional fleet management solutions.
“One aspect of this was Grosvenor’s fleet management and maintenance management support, which brought a whole new level of expertise to our overall fleet operation.”
According to Mary, a blend of contract hire, salary sacrifice and personal leasing can formulate the perfect model for moving towards ULEVs and EVs. However, if ownership remains the preferred funding option, it is worth looking for support from a specialist fleet management provider.
“At Interactive Fleet Management, the Grosvenor Group’s specialist fleet management team, we are seeing a big rise in demand for outsourced fleet management,” said Mary.
“Facing the prospect of a growing plug-in hybrid (PHEV) and battery electric vehicle (BEV) fleet, many companies that pay their own garage bills have little, or no, previous experience of their servicing, maintenance and repair costs - giving them nothing to compare invoices to.
“At Grosvenor, however, we have spent many years understanding electric vehicles and investing in extensive training of our maintenance teams, which is why we are seeing a rise in the numbers of companies placing the management of their EVs in our safe hands as it could deliver very significant long-term savings indeed.”