Running a fleet of vans is usually a company’s largest expense after wages so here are some tips from commercialvehicle.com which can deliver financial and environmental savings.
For any business running a fleet of vans, or indeed cars, the pressure to reduce costs is a constant challenge since fleet managers have to maintain service levels on a reduced budget.
In addition, there are also demands for fleets to improve their environmental credentials which will reflect well on the organisation and firms are now more aware of their responsibilities under ‘duty of care’ legislation.
This means that a firm’s van fleet whether it’s leased, owned or rented is a crucial aspect of the business.
For many firms there are big savings to be made in fleet management from how and where they get their vehicles from, to how they maintain and sell them on.
There are also financial benefits to be had from the introduction of telematics, fleet software and fuel cards.
Should you buy or lease your van?
The purchasing of a van is the first big question facing many firms and there are positives to leasing or owning it outright which should be considered carefully.
In addition, vans can also be hired and some may look at the issue of ‘grey fleets’ which is to use an employee’s own vehicle.
For this article we are not going to look at grey fleets and instead focus on what should be best practice for firms that run their own vehicles.
There’s no doubt that many firms opt for a course of action because that is simply what they have always done; but that doesn’t mean that it’s the most effective or profitable way of running a fleet of vans.
The major benefit for leasing a van is that there is a set monthly outgoing for a set period of time so the business knows exactly what expenses they will be facing, particularly if they opt for a lease scheme which includes maintenance.
Costs for leasing, renting or owning a van
At the end of the lease, the van will be returned to the leasing company which will then dispose of it which means the headache of selling it on is theirs and not the businesses.
This also means that should the van suffer from hefty depreciation then this does not affect the business itself, or its balance sheet.
Many firms still choose to buy their van outright which means that it’s an asset for the business but it also means that any servicing or repair costs also have to be paid.
Depending on the mileage that is racked up, the firm will still have to sell the vehicle on when they have finished with it so the expected value may well be less than expected.
However, another avenue for owning a vehicle became popular during the recession and that is to rent a van for a business.
Renting a van brings flexibility
The real attraction for renting a van is the flexibility involved with firms willing to rent either by the hour or long-term for several months.
This will bring inevitable cost savings while offering the flexibility in busy periods.
Essentially, the most effective thing a business can do when deciding on which method is the best way to own a van is to consult with a fleet management firm who will lay out all of the options and explain the tax and cost advantages.
Another important distinction in working with a fleet management firm is that they are able to get vans more cheaply from the manufacturer and pass those savings on to their client base.
This will inevitably mean that the running costs are lower and for large firms running big van fleets this also raises the opportunity of negotiating directly with the manufacturers for big discounts on large orders.
Van remarketing and its impact
Again, the remarketing of vans is a crucial element for the effective running of any fleet and businesses need to be aware of the van’s value at the end of its life.
This also means that the van should be in good condition, even a minor dent will have a big effect on its value to a buyer, and that when the firm disposes of it that they are able to get the maximum value at that time.
For fleet managers with a large number of vans to run, this is a tricky operation in maintaining and running a fleet while keeping an eye on its eventual disposal value.
This approach has also flagged up another popular way of saving money while running a van fleet to extend its life with the business.
Most firms have run their vans for an average of three years but now many firms are opting to run vans for four years – industry figures suggest that 70% of fleets are now being run this way.
Van reliability boosts length of ownership
Those firms which opt to lease their van can see big savings by choosing to lease for four years and reliability has improved so much in recent times, that these vans are going to be good and strong workers.
Just to put this into context, one of the world’s biggest suppliers of leased vehicles is GE Capital and they have worked out that a business that is running a fleet of 500 vehicles with 10,000 business miles a year could save £180,000 by extending their lease to four years.
That’s a huge saving to be had on big fleets especially since the van will probably still be covered by the manufacturer’s warranty.
Indeed, that’s the finding of the Corporate Vehicle Observatory (CVO) Barometer which says that big fleets around Europe are definitely keeping their leased vehicles for longer.
The research was carried out by contract hire firm Arval and their insight manager, Mike Waters, said: “During the economic downturn it was common for firms to keep vehicles longer and this is a strategy that is relevant for many firms.”
Another issue that was touched on earlier in this article is the cost of servicing and maintenance.
Service and maintenance costs for vans
For a firm that leases their vans, this is not such a major issue since the costs are either factored into their monthly outgoings but they must take their van to a dealership for the work to be carried out.
However, for those firms that own their vans they could save money by using non-franchised dealers to carry out the work and save more by using non-original equipment if necessary.
With independent garages charging around £40 an hour for their work, this could be a big cost saving for most firms.
Franchised dealers have seen this trend developing and now many offer a more competitive package of servicing and repairs and using cheaper original equipment which is a big attraction for a business that relies on its van be on the road.
Indeed, many of these franchised dealers offer quick turnarounds for any necessary work with many having workshops open through the night so that the vehicle is out of action for the least amount of time.
It’s also interesting to note that businesses are not tied to using a franchised dealership for servicing and repairs and their manufacturer warranty will probably not be affected if they don’t use a franchised dealer but it’s always wise to check.
Businesses with leased vans should also be aware that they can also opt to pay their own service and maintenance repair bills rather than having this incorporated into their monthly bill.
Around three quarters of leased vehicles have a maintenance element as part of their agreement but there is money to be saved for a business since vans have better reliability and longer service intervals which means a business could save a packet by opting out of this.
Introduce fleet management software
When people talk about van fleet management software they are not necessarily talking about telematics (which is the focus of other articles on commercialvehicle.com).
Instead, they are talking about a computer program that will enable a business to run their fleet more effectively and which will ensure the van is kept running as necessary while analysing running costs and ensure that the firm is complying with its duty of care obligations.
This is an excellent way to monitor exactly what the van is doing and how efficient and profitable it is.
As with telematics, some van fleet software comes with a route planning options to help bring costs down by reducing mileage.
However, this isn’t to say that a firm should not introduce telematics into its vans or cars which is a way to analyse more effectively how the vehicle is being used.
Telematics will not only look at the mileage and routes but also driver behaviours and whether the van is being driven properly or whether any laws have been broken.
Van telematics can boost performance
This is also an effective way of improving fuel economy which is a major bill for every business.
It’s this element of encouraging better driving that also leads to lower insurance costs since the professionalism of the driver is being analysed.
Essentially, telematics and van fleet software will boost productivity and help keep every day running costs low – though many firms will also see whether they have a van that is fit for purpose and whether they should be looking for a better, and possibly, cheaper option.
A spokesman for the RAC said: “For a business with a small fleet of vehicles, telematics is a powerful solution for managing fuel costs and keeping drivers and vehicles working efficiently.”
There’s also a big saving to be had by introducing simple measures such as checking the tyre pressures regularly on a van which improve fuel economy and help the tyres last longer.
Gerry Keaney, chief executive of the British Vehicle Rental and Leasing Association, said the number of vans on the UK’s roads has grown significantly because of tighter legislation on larger commercial vehicles.
He explained: “Vans are an alternative to big commercial vehicles which have a strict regime over how they are driven and maintained.”
There’s no doubt that the number of vans on our roads are growing but there are cost effective ways of running larger fleets that fleet managers and business owners need to appreciate and to profit from.