Fleet Leasing

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.