To celebrate our 30 years in the fleet, we recently created a PDF guide for you to download: 30 Ways To Reduce Fleet Costs.
1. Reconsider funding methods
Consideration of alternative funding methods is a fundamental starting point when reviewing a fleet strategy. Changes within your business operations and external factors can mean the decisions you arrived at three or four years ago may not stand up to scrutiny right now. There are several ways to fund a fleet and Contract Hire remains the most popular within the UK thanks to a number of financial and operational benefits. A reputable contract hire provider will be able to negotiate manufacturer terms on your behalf and should have access to a panel of funders which can result in superb value. Even if your current fleet is owned outright it may be possible to sell some of your fleet to a contract hire company and lease them back.
2. Develop a choice list based on CO2 and MPG
The cost and environmental arguments for adopting a basic capping level on CO2 and MPG are very strong. By rewriting your choice list to include only vehicles with CO2 figures of no more than 140g/km and with fuel consumption of no less than an average of 45mpg you will realise savings in fuel, National Insurance and Benefit in Kind taxation. You may feel that this change would add too many restrictions; however with around two-thirds of the currently available cars on the market being able to fit into the lower emission target you’ll be pleasantly surprised at the range of vehicles available.
3. Remove vehicle choice
If you’re bold enough to remove choice altogether by adopting just one job requirement car and one management model you could potentially access the biggest estimated saving in this whole guide. This may at first be unpopular with drivers, but their concerns could potentially be met by being able to drive a much ‘better’ car thanks to the economies of scale and increased buying power. Of course there are certain industries and roles where recruitment and retention are key issues, and in these cases such a radical move should not be taken lightly. For most fleets, this would be a dramatic policy move, but the cost arguments make it worthy of serious thought. (A bonus for fleet managers is that it makes vehicle reallocation very simple).
4. Choose vehicles based on whole-life costs
It's important to review total cost of ownership as the platform from which the optimum vehicles for the fleet are selected. Many fleet managers still select vehicles based on their purchase price or P11D banding. This doesn’t provide an accurate picture of a vehicle's true cost across its lifetime on the fleet. Your contract hire provider should have access to financial modelling software to take into account the variables such as fuel, fleet, taxation, maintenance and insurance.
5. Examine cash allowances versus company cars
Cash for car schemes usually cover more than just the provision of a vehicle to the employee and bringing yours into alignment with your company car scheme could provide substantial savings. To get an idea of what savings can be made, you should compare costs for each company car grade (including mileage reimbursements) with the cash option that you provide. You may be very surprised at the differences. Where appropriate you should take steps to bring packages into alignment. However, you will need to take into account any commitments made by cash takers regarding existing personal leases or loans.
6. Encourage fuel efficient driving
Encouraging your employees to drive more efficiently could help to cut your fuel bills significantly (according to the Energy Savings Trust, savings of 15% can be achieved). Drivers doing 12,000 miles a year can make average savings of around £250 each year just by improving their driving habits.
The suggested driver tips to help achieve these savings include:
Better use of gears
When accelerating, engine revs should be kept low. Drivers should change gear early (often below 2,000rpm). Where appropriate, change gears in a ‘block’ when accelerating, for example third to fifth, and adopt the same principle when changing down through the gears to slow down.
The faster you go the greater the fuel consumption and pollution. (This seems obvious and we’ve covered this topic later within this guide).
Keep tyres at the right pressure
Tyres running at the wrong pressure aren’t just a safety concern but also wear much faster. Additionally they increase fuel consumption to a degree that many fleet managers find surprising. According to AutoTrader, driving with under-inflated tyres can reduce fuel economy by up to 10%. Tyre pressures should be checked regularly and before long journeys. Consider issuing drivers with handheld tyre pressure monitors and make it part of their responsibility to frequently check their tyres.
Cut down on air conditioning use
Air-conditioning increases fuel consumption at low speeds, but at higher speeds the effects are less noticeable. If it's a hot day open the windows around town and save the air conditioning for high speed driving. (At speeds below around 35-40mph it’s more efficient to open a window). Don't leave air-conditioning on all the time but aim to run it at least once a week throughout the year to maintain the system in good condition.
Remove roof racks and roof bars when not needed
A large roof rack or roof box can increase fuel consumption by as much as 30% at motorway speeds.
Stuck in a jam? Switch off
According to ‘Fleet News’, research says that if your vehicle is going to be stationary for more than 20 seconds you’ll see a fuel saving from turning your engine off, but the amount saved will be small – around 0.5 litres per hour. The AA recommends switching it off if you’re likely to be stopped for more than three minutes.
Remove clutter from your boot
Unless your boot is fully loaded with unnecessary heavy items the potential to make savings will be very small. However, any saving should be seen as a good saving!
Anticipate road conditions
Through better anticipation, drivers can reduce unnecessary acceleration and braking and make the most of the vehicle’s momentum. This can mean looking three or four vehicles ahead and picking up subtle clues from drivers as to what manoeuvres they will carry out next.
Maintain the focus on fuel savings
Keeping a focus on savings in the months and years ahead will depend upon good fleet management and communication. The Energy Savings Trust encourages Fleet Managers to monitor individual drivers’ fuel consumption and to relate this to their vehicle’s official fuel economy. You could also consider publishing league tables internally and run exception reports to highlight the worst offenders who you might then want to offer additional information or training.
7. Choose your fuel card provider wisely
When selecting a fuel card provider choose a one that makes tracking expenditure easy through online reporting tools. The efficiency of the fuels themselves can also vary considerably. Shell’s FuelSave products can deliver extra efficiencies of around 2% - which when calculated across a large fleet can easily amount to six figure annual savings.
8. Remove free fuel
Free fuel is now becoming a much less attractive perk due to changes in benefit in kind taxation. Since the late 1990s the government has gradually increased the scale charge on ‘free’ fuel. Consequently for many company car drivers, the tax on their private fuel is actually greater than the tax they pay on their company car. But for the lucky ‘perk car’ drivers who still benefit financially from this arrangement ask yourself what is their motivation to save on private fuel?
9. Encourage refuelling at the right places
Prices at the forecourts can vary considerably depending
upon factors such as local competition and location. Journey planning and
refuelling early will eliminate the need for an urgent refuel at the more
expensive places such motorway service stations.
10. Communicate cost saving ideas effectively
11. Van fleet tips
Many of the recommendations in this guide work for cars and vans alike, but here’s some additional tips specifically for van fleets.
Journey and route planning
This is one of the most neglected areas of fleet management. For a sizeable van fleet you may wish to consider investing in software that optimises a route for each of your vans based on the operational needs of each day. The benefits of minimising the miles travelled and avoiding known areas of congestion help to deliver savings in the areas of fuel, tyres, accident rates and even penalties resulting from missed service delivery deadlines.
Additional suggestions for van fleets:
- Downsize to smaller vans where appropriate
- Choose white vehicles and add livery rather than use odd colours which are known to reduce residual value
- Investigate the potential benefits of bunkered fuel
- Review ancillary equipment and shop around for cheaper alternatives
- Consider fitting speed limiters which will help to save fuel, wear and tear and accidents
12. Accident Management
Downtime of any business vehicles impacts profitability, causes disruption, creates additional admin time and potentially affects business-client relationships. According to a recent study by an accident management company, business drivers have collision rates that are 30-40% higher than those of private drivers.
Making drivers aware of the higher risk situations can help
to reduce incidents. Surprisingly, most accidents occur at times we consider
low risk such as when the weather is clear. Different road types also make a
difference. Accidents on A roads are thought to represent 20% of the share of
all accidents, car parks are at 10%, B roads at 11% and motorways at just
Fleet Managers should consider using an Accident Management company. The specialist nature of these firms means they have well developed sector networks, covering everything from vehicle recovery, repair work, legal assistance, personal injury claims and vehicle replacement. The Fleet Manager can therefore concentrate on core business functions confident that the situation is being professionally handled.
13. Consider petrol vehicles for low mileage drivers
Don’t automatically assume diesel will work out cheaper.
Although petrol cars often work out more expensive for fleets in the long run,
it could take several years of fuel efficient motoring to make buying a diesel
vehicle worthwhile. If you’re planning to keep the vehicle for just a few years
or if it will be used by a low-mileage driver (less than 10,000 miles a year)
you could actually save hundreds of pounds per vehicle by opting for a petrol
What about the differences in servicing costs? Over a typical three or four-year ownership period, you're unlikely to see a significant difference between servicing costs for equivalent petrol and diesel cars.
What about Residual values? For Fleet Managers who prefer to purchase outright, consider carefully what each vehicle be worth when you come to sell it. For example, diesel cars generally retain their value better than petrol versions thanks to people looking for cars with better fuel economy and lower road tax rates. The 1.4-litre diesel VW Polo BlueMotion, for instance, is exempt from car tax charges under current rules. But the equivalent, 1.4-litre petrol VW Polo is hit with an annual bill of £120.
14. Optimise daily rental usage
Watch out for employees looking to hire vehicles with powerful engines and an unnecessarily high specification. A policy driven decision is more likely to result in savings more than a driver based one.
Consolidate suppliers – this will help achieve better rates
and will also make it far easier to monitor costs and usage. Online booking and
management platforms now make this a straightforward process.
The purchase of a daily vehicle rental should only be used whenever there is no suitable alternative.
We recommend using the following check list to help keep your costs to a minimum.
- Are there any company vehicles available for use at your location? Ensure all company vehicles can be made available when not in use.
- Can the number of days rented be shortened in any way? For example, do you really need delivery of the car the day prior to your journey?
- Can a smaller vehicle type be used? Consider how many people will be travelling and what mileage will be covered on the journey.
- Do you need the vehicle delivered to your home? The fee for home delivery can be twice the cost of a delivery to site
- Having rented the vehicle, it is a requirement that the driver refuels the vehicle prior to it being collected – most rental companies charge a service fee for refuelling vehicles which can increase the cost by a third.
15. Reduce grey fleet journeys
Much has been covered in the fleet press regarding the corporate manslaughter risks associated with grey fleet drivers but how do these journeys affect costs? Grey fleet mileage re-imbursement rates are normally considerably higher than alternative modes of travel, so putting grey fleet journeys firmly in the spotlight will encourage employees to make more considered decisions about the work related trips they make.
According to Sewells Research & Insight a third of companies with grey fleets do not record the mileage of these vehicles. The research conducted also demonstrated an awareness of the need for improvement as 80% of respondents felt that it would be more beneficial to monitor their fleets more closely, while 46% said they were looking at limiting the mileage of their grey fleets.
The Office of Government Commerce issued a Grey Fleet Best Practice report in 2008 which highlighted the potential cost savings:
- A 20% reduction in organisational grey fleet mileage of 10 million miles could generate an annual net saving of over £1 million.
- 10 million miles at an average speed of 40mph would take up to 250,000 hours. Assuming an average hourly cost of £15, this would represent £3.8 million of indirect costs, which could be reduced through eliminating unnecessary journeys and using alternative forms of transport.
16. Ensure your fleet partner is a ‘good fit’
How should you select a new fleet partner to deliver cost savings without making sacrifices in customer service? You may be tempted to look at one of the biggest fleet companies, but you should also take into account how your business looks to them within the context of their own ‘fleet size’. They may do a great job looking after clients with fleet sizes of 1000 vehicles or more, but how do they treat customers with a smaller fleet of 20-40 vehicles? In this instance a smaller sized fleet company may be a better fit.
Other important areas to look at:
- How long have they operated within the sector?
- What service level agreements and key performance indicators do they work towards?
- What makes them tick? Is their culture rooted in finance, motors, IT?
- Have they recently merged with another company and are still going through the integration process?
- Are they tied to a single funder and do they cover all manufacturers?
- How many long standing clients do they have?
- What do their customers and lost customers say about them?
- Who is the parent group? What are their IT capabilities?
- Are prices proposed in the early tender stages sustainable over the longer term?
- What would their implementation plan look like?
17. Minimise end of contract charges
What is considered as ’ Fair Wear and Tear’ does vary between leasing companies, so you should check the terms and conditions of your lease provider.
As a general rule, small areas of chipping, including door edges, are usually acceptable, as are slight scratches and abrasions provided primer or bare metal is not showing. The British Vehicle Rental & Leasing Association (B.V.R.L.A.) has set out an industry Fair Wear And Tear standard to help drivers of leased and financed cars to reduce or eliminate De-Hire Charges. There are a number of specific things the driver should do to minimise end of hire charges:-
- The vehicle should be in good working order in all respects
- All tyres, including the spare, must meet the minimum UK legal requirements
- There should be no rust or corrosion on any painted area
- Visible dents and deep scratches on body panels should be repaired
- There should be no tears, burns or other damage to the upholstery
- All original equipment must be present and operate correctly
- The exterior of the vehicle should be cleaned to facilitate inspection
- The interior of the vehicle should be valeted and cleared of rubbish
- The Service Book should be date-stamped by an authorised service centre
- The two sets of keys that were originally supplied should be available
- All documentation including service book and manual should be in the vehicle
Vehicle collection at the end of the contract
A company with a streamlined and transparent vehicle returns process will carry out an inspection several days before the actual collection with the driver present to reach a joint agreement. This also provides the opportunity to minimise any costs (e.g. finding spare keys, service history and handbooks). Technology now allows an accurate record of vehicle condition to be made and made available to the customer on request.
18. Reduce driving speed
When you dispatch your delivery vehicles, your service engineers or sales reps to a customer, you probably ask them to arrive as quickly as possible. Your drivers almost certainly drive to their appointed destinations as fast as possible, perhaps exceeding the speed limits as they go.
Excessive speeding is risky and uses much more fuel. According to the AA, driving at 70mph uses up to 9% more fuel than at 60mph and up to 15% more than at 50mph. Cruising at 80mph can use up to 25% more fuel than at 70mph. Even if you have a small fleet, making a fuel cost saving of just a few percent per journey makes a huge impact and goes some way to offsetting fuel price increases. If you have a large fleet then the potential benefit will be even more dramatic. In some instances it may be worth installing vehicle tracking systems which can send alerts to the fleet manager or driver to tell them when they're exceeding speed limits and encourage them to slow down.
19. Demand expert advice from your Account Manager
The management of a fleet normally falls into two areas;
1. Day-to-day interaction with your drivers, which should be supported by a helpdesk manned by persons that fully understand your car policy, your restrictions and requirements
2. The more strategic analysis of fleet data. Your Account Manager should not just oversee transactional and reactive service, they should provide recommendations on policy or pricing improvements and keep you up-to-date on industry developments, legislation, manufacturer negotiations, management information, driver support and added value services.
They should also help you identify ways to optimise fleet processes, increase efficiencies, and improve overall levels of driver satisfaction.
Introducing a vehicle tracking system can encourage drivers to be responsible for their driving and to be more aware of bad habits. When drivers know you’re monitoring their driving behaviour, speed and fuel consumption, they’ll take greater care of how they drive the company vehicles. Subsequently you'll see a positive impact on fuel costs, vehicle wear and tear and maybe even an improved reputation with the general public. Additional cost savings are also achieved by the resulting reduction in insurance premiums.
21. Reallocation of vehicles
In many organisations the company car fleet accounts for the second largest overhead expenditure (after salaries) and taking into account today’s economic climate, maximizing all opportunities to achieve cost savings should be taken. It’s therefore important to have a reallocation policy in place. This avoids having to place a new vehicle order for a new employee and avoids any daily rental costs incurred while waiting for the delivery of a new vehicle. Your fleet provider can provide the necessary support to ensure that the reallocating vehicles are checked, any remedial work completed, and that they are fully valeted ready for delivery to the new driver.
22. Management Information
How quickly can you access information showing your fleet costs? Taking action to reduce costs is fine, but proving your achievements and identifying the tricky areas without powerful fleet reporting tools will be difficult. Your Account Manager will be able to provide you with timely management information and quarterly reviews, but this should be supported by an online capability available at any time and accessed via your own personal login.
23. Avoid excess mileage
a) Aiming for the lowest miles possible when costing a new contract will reduce the monthly rentals and will also give you an incentive to keep mileage low. But you will need to be realistic with your mileage predictions.
b) Your leasing company should be working with you to ensure there aren’t any end of contact ‘surprises’, but to enable your account manager to play their part, you must provide regular mileage updates.
c) As many manufacturer lead times extend you should keep on top of vehicle ordering timescales. It may be worth returning your lease vehicle and utilising a daily rental vehicle if the excess mileage charge is too onerous.
d) Consider adopting telematics systems to capture accurate mileage readings. Telematics technologies have become very sophisticated and can now help to better manage costs and risks.
Another obvious one! Will a conference call, video conference, or online presentation eliminate the need for some meetings?
25. Optimise pool car usage
All too often pool car management is left to someone who has no direct involvement in the overall company fleet. When used correctly, a pool car fleet can be the most cost effective option providing savings against ad-hoc daily rental or the mileage expense of grey fleet users. A good leasing company can help manage your pool fleet, ensuring that you have the optimum number of vehicles and that these are correctly maintained.
26. Driver training
To help to communicate the benefits of more fuel efficient driving a formal training day can help to cement the suggested initiatives in the minds of your drivers. This will work best in conjunction with frequent reminders communicated via other means.
27. Car sharing
We all enjoy independence, but do your team members always need to drive in separate cars? The next time your team plan to attend the same venue (e.g. a client visit, conference or trade exhibition) look for the opportunity to car share.
28. Outsourced fleet administration
Organisations that try to do too much in-house can incur unnecessary costs and allocate valuable resources on non-core business activities. By outsourcing some of the more routine back office fleet tasks you may be able to take advantage of an external company’s best practice efficiencies and cost savings delivered through expert maintenance management.
29. Look for the hidden costs
So far in this guide we’ve covered the main areas you’d expect but surely there are other indirect areas where you could make a difference? We’ve already mentioned outsourced fleet administration tasks, but don’t overlook your own time management. Time is money, so don’t forget to take a look at your typical working week and look for areas where you could work smarter.
30. Continuous improvements
This is more of a mind-set than an action point but should not be neglected. You may be running a tight ship and operating a well-managed and efficient fleet, but constantly changing external factors such as taxation, technology and employment law will constantly present new issues and opportunities. Don’t leave fleet off the radar when running a company suggestions scheme - why not ask employees for suggestions to reduce fleet costs?
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