Fleet Leas­ing

New Zealand Company Vehicle - - CONTENTS -

So, what hap­pened to your com­pany fleet and its man­age­ment when the GFC hit? Can’t re­mem­ber? It was quite a while ago, but we’re go­ing to take a wild guess here and sug­gest many com­pa­nies went down a sim­i­lar thought process to this: Ray­lene in ac­counts is prob­a­bly quite ca­pa­ble of look­ing af­ter the fleet, it’s just re­gos, Wofs, tyres and the oc­ca­sional speed­ing fine to worry about. The cars don’t need ser­vic­ing, be­ing out of war­ranty and all, and there’s petty cash for fuel, so long as the re­ceipts are there. Watch out for Jones though, he can spend a fair whack on fuel. We might have to ‘re­trench’ his car. With Ray­lene do­ing this – plus her job of course – the busi­ness could save oo­dles in fees paid to its lease com­pany of choice. Good old Ray­lene – who lives for the com­pany to all out­ward ap­pear­ances, but who re­ally ac­cepts new job re­spon­si­bil­i­ties be­cause of that ‘other du­ties as re­quired’ clause in her con­tract – man­aged to some­how stay on top of fleet “mis­sion crit­i­cal is­sues,’’ while still per­form­ing her own tasks. Hope­fully, Ray­lene’s go­ing to get more than a gold watch when she re­tires, be­cause her com­pany was tak­ing se­ri­ous ad­van­tage of her good na­ture. For­tu­nately for Ray­lene, the GFC af­ter-ef­fects are start­ing to wear off and busi­ness ships are start­ing to travel on more even keels. En­gag­ing fleet lease and fleet man­age­ment com­pa­nies is a trend that’s come back into vogue, sug­gest­ing that for com­pany fleet man­agers, the times, they are a’ chang­ing. Ray­lene, for all her qual­i­fi­ca­tions as an ac­counts per­son, prob­a­bly picked up a fair few skills as the in­terim fleet ad­min­is­tra­tor, which would have kept the fleet mov­ing with only a few wrin­kles, but that is most likely be­cause she was work­ing with an ex­ist­ing fleet. Oh yes, she is prob­a­bly OK with ar­rang­ing fi­nal bal­loon pay­ments, but has Ray­lene been given enough author­ity and time to ne­go­ti­ate fuel cards, ini­ti­ate driver fit­ness checks, or­ches­trate on­go­ing driver train­ing

sched­ules and dis­cuss dis­count lev­els for ac­ces­sories, tyres and ser­vic­ing costs? Prob­a­bly not. We’ll come back to Ray­lene in a minute, but right now, it’s pos­si­bly time for com­pany’s which, up un­til now, have left the fleet man­age­ment in an em­ployee’s care, to look around and see what the smart cor­po­rates are do­ing. They’re talk­ing to lease com­pa­nies again, be­cause fleet man­age­ment to­day – of which ve­hi­cle leas­ing is a prime con­sid­er­a­tion – is a spe­cial­ist role unto it­self. Foist­ing the re­spon­si­bil­ity onto some­one who hap­pens to know the dif­fer­ence be­tween say, a Mazda and a Maserati, is prob­a­bly not the most ef­fec­tive so­lu­tion for in­creased com­pany prof­itabil­ity. In the hey­day of leas­ing com­pa­nies when global fi­nan­cial con­fi­dence was high, putting the busi­ness of run­ning a fleet into the hands of ex­perts was pretty much a no-brainer. Fleet man­age­ment was their busi­ness just as wid­get mak­ing was yours – and you

were busy mak­ing damn fine wid­gets! Let the lease com­pa­nies do what they do best. Then the wheels fell off – not off your fleet ve­hi­cles, but fi­nan­cially. With a rip­ple ef­fect felt all around the world, sud­denly, it was a case of en­sur­ing busi­ness sur­vival which meant fol­low­ing the mantra of ‘save money, cut ex­pen­di­ture, for­get out­sourc­ing.’ This was fol­lowed by a lot of busi­ness and profit pain and fi­nally, a col­lec­tive sigh of re­lief from the busi­nesses who sur­vived. To­day, those busi­nesses are a lit­tle more cir­cum­spect when it comes to out­sourc­ing – and rightly so. How­ever, the leas­ing com­pa­nies have changed their ap­proach – with a great many com­pa­nies hav­ing had to re­struc­ture them­selves in the GFC af­ter­math. As with other busi­nesses, it has been a case of the strong sur­viv­ing and what’s more, those leas­ing com­pa­nies who weath­ered the storm are sym­pa­thetic to their cus­tomers’ con­ser­va­tive ap­proach when it comes to lease com­pany en­gage­ment. “We are see­ing a def­i­nite shift in the mind­set of our cus­tomers,” says Ge­off Tipene of SG Fleet. “They are be­ing pru­dent when it comes to the de­gree of au­ton­omy they are happy to give us, and we think this is an ex­cel­lent build­ing block for new busi­ness part­ner­ships. “The big­gest growth area for change in the leas­ing mar­ket, es­pe­cially for the larger fleets, is the up­take of telem­at­ics, par­tic­u­larly in the last three years,” Ge­off says. “Telem­at­ics, when used prop­erly, is the big­gest fleet in­flu­enc­ing tool which mod­i­fies driver habits to ef­fect change. The in­for­ma­tion that can be mined through in­tel­li­gent ap­pli­ca­tion of telem­at­ics can then be used to en­sure the fleet is be­ing op­er­ated to the com­pany’s great­est ben­e­fit.” Ge­off goes onto ex­plain the up­take of telem­at­ics by larger com­pa­nies has seen re­duced num­bers of speed­ing fines, ze­roed in­stances of fraud­u­lent use of fuel cards and has im­proved util­i­sa­tion of ve­hi­cles. Where one com­pany divi­sion may have three ve­hi­cles as­signed to it, an anal­y­sis of util­i­sa­tion through telem­at­ics suggests that the divi­sion only re­quires two. The third ve­hi­cle can then be dis­posed of or re­de­ployed; which­ever is the most ap­pro­pri­ate for the cus­tomer at the time. “Telem­at­ics is, quite sim­ply, a busi­ness tool which al­lows our leased ve­hi­cle cus­tomers to max­imise their ve­hi­cle in­vest­ment, ef­fi­ciently and ac­cu­rately,” Ge­off says. “As an ad­di­tional ben­e­fit to the cus­tomer, telem­at­ics is an as­sur­ance of trans­parency. The lease com­pany sup­ply­ing the ve­hi­cles and the telem­at­ics sys­tem is con­sid­ered a third-party en­tity which can be as in­volved as much or as lit­tle with the op­er­a­tion of the fleet as the cus­tomer re­quires. Since the lease com­pany mon­i­tors the data, it can – and is fre­quently – the first point of con­tact be­tween the driver and the com­pany he or she works for. “For the com­pany, that’s great, as a fleet man­ager’s role th­ese days can be a full-time oc­cu­pa­tion, par­tic­u­larly with larger fleets. With a lease com­pany tak­ing a con­trolled amount of re­spon­si­bil­ity, the fleet man­ager is freed up for other du­ties or big pic­ture analy­ses.” Ge­off’s in­sight into leas­ing and fleet man­age­ment to­day backs up NZ Com­pa­nyve­hi­cle’s take on the leas­ing land­scape, which brings us neatly back to Ray­lene’s desk... At the time Ray­lene was up to her el­bows in sort­ing out Wofs and fines that kept on crop­ping up at the most an­noy­ing times, the car com­pa­nies saw an op­por­tu­nity to

cap­i­talise on a new po­ten­tial rev­enue stream – di­rect leas­ing. Tak­ing the usual long lead-ap­proach they are so used to when it comes to prod­uct plan­ning, au­tomak­ers slowly be­gan to in­te­grate di­rect leas­ing into their busi­ness model. Di­rect leas­ing had of course, been around for a while, but it was re­ally dur­ing the GFC crunch that di­rect leas­ing could be fine-tuned, sub­stan­tially ‘beefed up’ and in­ter­linked with tra­di­tional cus­tomer pain points such as ser­vic­ing. We be­gan to see car brand fi­nanc­ing, with ex­cel­lent in­ter­est rates, fur­ther sup­ported first by capped rate sched­uled ser­vic­ing and more re­cently, un­re­stricted three year/100,000km trans­fer­able free sched­uled ser­vic­ing plans on of­fer. I’ll bet Ray­lene’s a fan. To­day, the ev­ery­day busi­ness can take ad­van­tage of car man­u­fac­turer’s di­rect leas­ing pro­grammes which work – am­i­ca­bly enough – along­side the tra­di­tional – but more en­light­ened – Fleet Leas­ing Or­gan­i­sa­tions (FLO’S); a win-win-win sit­u­a­tion for the FLO’S, Moco’s and cor­po­rate Joes. At one point, it would not have been un­rea­son­able to see dag­gers drawn be­tween tra­di­tional leas­ing or­gan­i­sa­tions and man­u­fac­turer leas­ing op­er­a­tions, but this is not the case. In­deed, the tra­di­tional FLO’S not only tol­er­ate the man­u­fac­turer-di­rect or­gan­i­sa­tions, they al­most wel­come them. And on the other side of the coin, the man­u­fac­turer-di­rect lease or­gan­i­sa­tions are happy to be along for the ride, and they have found they don’t have to be overly ag­gres­sive. Let’s face it, a car man­u­fac­turer’s first duty is to well, man­u­fac­ture cars. Any­thing else that makes money and doesn’t un­duly de­grade the prof­itabil­ity – or in fact, adds to it – is a bonus. Joe Bond of Honda Lease Di­rect makes no se­cret of the fact that there is a place in the mar­ket for ev­ery player. He adds that the good play­ers are the ones who know the mar­ket they op­er­ate best in. “Sure, we’d love to have those 200-400 ve­hi­cle fleets,” he says can­didly, “but the truth is, there are or­gan­i­sa­tions out there bet­ter equipped to han­dle their re­quire­ments. Our strength lies with our abil­ity to look af­ter the smaller fleets, which we do very well, and the big­ger lease com­pa­nies ap­pre­ci­ate the fact

that we’re here do­ing that. It’s not the best use of their time nor ex­pe­ri­ence to deal with fleets that are our bread and but­ter, so we are kind of look­ing af­ter each other in that re­gard.” To the cyn­i­cal, this sounds rather utopian, but in fact, it’s very much a re­al­ity in the New Zealand fleet mar­ket. The big fish swim in the sea, the smaller ones in the rivers and ponds. In say­ing this, the com­pe­ti­tion is fierce in the ponds and rivers, just as it is ag­gres­sive in the sea. And while like-for-like com­pa­nies are vy­ing for fleet busi­ness, like-for-like is one of the el­e­ments Joe high­lights as some­thing the SME’S should be mind­ful of when it comes to ar­rang­ing leases and form­ing pro­fes­sional part­ner­ships. “While trans­parency is the big buzz­word in leas­ing to­day,” Joe ex­plains, “it is very easy for cus­tomers to be swept up with how easy ev­ery­thing ap­pears to be, par­tic­u­larly when leas­ing can be dis­tilled into easy to un­der­stand con­cepts.” A good ex­am­ple is the fo­cus on the two pri­mary lease types: non-main­tained or fully-main­tained. “Th­ese are the two sim­plest forms of lease, and prob­a­bly the most com­mon. They are also the ones a cus­tomer needs to ex­am­ine most care­fully, es­pe­cially if that cus­tomer is ‘shop­ping around’ be­tween brands. The devil is – as they say – in the de­tails and, while a non-main­tained lease from Brand A should be the same as from Brands B C or D, this is very sel­dom the case.” Com­pa­nies look­ing at leas­ing must be very sure they are com­par­ing ap­ples with ap­ples, Joe sum­marises. In a lot of cases, busi­nesses see a start price, a stop price and the cost in the mid­dle as a ba­sic for­mula for leas­ing, but its that cost in the mid­dle which has the po­ten­tial of chang­ing your ap­ple to a lemon. There are many el­e­ments po­ten­tial lessees need to watch for: tyre re­place­ment and bat­tery re­place­ment are quite big ones – and we sus­pect wind­screens may be an­other one to be aware of. On one or two cars, its not a huge deal, on a fleet of 20, it’s a dif­fer­ent – and of­ten ex­pen­sive – ball game. An­other area to be mind­ful of is the end of lease con­sid­er­a­tion, an area which Honda Lease Di­rect con­sid­ers a defin­ing point of dif­fer­ence be­tween it and the com­pe­ti­tion, with its re­bate on re­turn pol­icy: A car is leased over a stan­dard term pe­riod with an agreed upon num­ber of kilo­me­tres driven. At the end of the pe­riod, the ve­hi­cle is re­turned. The ve­hi­cle’s kilo­me­tres have been ex­ceeded, there­fore the lease com­pany is per­fectly en­ti­tled to charge for those ex­cess miles. But what if the car is re­turned hav­ing trav­elled less than the agreed upon mileage? “Honda Lease Di­rect clients gen­er­ally walk away happy in this sit­u­a­tion,” says Joe. “They en­joy the re­ward of a cal­cu­lated re­bate based on the mileage the car has done ver­sus the mileage agreed upon, in the form of a nicely writ­ten cheque, as op­posed to a merely a hearty hand­shake and an im­plied ‘y’all come back now’ from other man­u­fac­tur­ers.” The take­away from all of this is, fleet man­age­ment and leas­ing is now much more tai­lored to an in­di­vid­ual or­gan­i­sa­tion and busi­nesses have a much wider range of ve­hi­cle leas­ing and fleet man­age­ment options than ever be­fore. In typ­i­cal Damo­clean sword fash­ion how­ever, the down­side of great va­ri­ety is the temp­ta­tion of ig­no­rance through con­ve­nience, or a fail­ure on the part of a busi­ness to re­mem­ber the golden rule of due dili­gence. The ve­hi­cle fleet, and the man­age­ment thereof, is still a sig­nif­i­cant part of your com­pany’s re­sources and can have a pos­i­tive or neg­a­tive ef­fect on your or­gan­i­sa­tion’s prof­itabil­ity. As such, how you struc­ture your fleet and how you man­age it, is wor­thy of high pri­or­ity con­sid­er­a­tion and on­go­ing eval­u­a­tion, as any rep­utable leas­ing or­gan­i­sa­tion should re­it­er­ate when dis­cussing their take on a so­lu­tion for you. As an ag­ile SME, it is in your best in­ter­est to ‘shop around’ and see what’s out there, tak­ing lessons, in to­tal or in part, from the big­ger cor­po­rates if it is ben­e­fi­cial to do so – but con­sider leas­ing as any other pro­fes­sional busi­ness trans­ac­tion, and make sure you are truly com­par­ing like for like be­fore com­mit­ting to any sin­gle provider. Oh, and give your or­gan­i­sa­tion’s Ray­lene a pay rise or at the very least some flow­ers. She de­serves it.

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