The hidden costs of the Grey Fleet
Published on 19/08/2016
Where are we now with the use of grey fleet?
In the past, many businesses may have seen the ‘grey fleet’ as an attractive prospect. There’s no doubt an employee driving their own vehicle for work purposes is likely to have cut their initial outlay costs and the decision will seem cost effective in terms of time management for business owners. For many years, businesses in both the private and public sector have relied on a grey fleet to keep their businesses moving. While there are undoubtedly issues with Britain’s current reliance on grey fleet, it would be foolish to write it off entirely as a fleet management option.
According to a new report published by the BVRLA and the Energy Saving Trust, Britain’s grey fleet has seen some improvement in recent years in terms of management and steps have been taken to lower the risks associated with businesses operating and managing employee owned vehicles. However, grey fleet is still something that requires attention and review in order for businesses to ensure it is a viable transport option.
Grey Fleet costs how much?
Recent research suggests however, having a grey fleet operating in your business could be costing you more than you think, confusion over where responsibility lies in terms of compliance and duty of care is a great financial and reputational risk to any business.
The main issues many business owners experience when managing a grey fleet are, exercising control over mounting costs, ensuring they are providing duty of care and understanding where the responsibility lies in terms of legalities. Business owners should also have a responsibility to ensure fleets are operating efficiently to minimise risks to the environment.
One of the most pertinent of these issues is undoubtedly ensuring operational costs are being managed effectively. It is estimated that businesses are paying much more in parking charges and mileage costs among other daily expenses when using a grey fleet vehicle force. Environmental factors may also have a part to play, with many cars chosen by employees being older makes and models that don’t run as well as they could.
The cash flow for businesses operating a grey fleet is also something to be considered. Employees are usually reimbursed via salary sacrifice for mileage expenses incurred, something that needs to comply with HMRC requirements. This also requires administration work, the volume of which can vary depending on the size of the vehicle using workforce.
How can these costs be cut though? In today’s ever changing and ever developing automotive market, in order for vehicles to run efficiently and cost effectively, it’s important to update them to newer makes and models when possible. It is rare for older vehicles to be as environmentally friendly or rated as highly for safety as their newer counterparts. It is also worth remembering that lower emission cars will minimise Company Car Tax exposure for the employee, making greener models a more cost-effective and fuel efficient option for employers.
The transport industry is continuously seeking ways to improve its offering, making vehicles easier to operate and more environmentally and budget friendly to run. It would be silly not to take advantage of this, but as buying new vehicles every few years is off the cards for most people, is there a solution that’s both cost effective and enables businesses to ensure they are competently managing their fleets?
As vehicles are naturally a large expense for both private individual customers and business owners alike, many people are tempted to wait until absolutely necessary to look in to acquiring a new fleet. This is where leasing becomes a more viable option! Rather than investing in a vehicle that may be outdated in the long term and may depreciate in value, leasing a vehicle gives you the opportunity to utilise a business asset which can then be traded in for newer or more suitable model once the lease is up.
In many public sector industries, businesses are expected to be highly budget conscious, so providing employees with company cars can be perceived as an extra expense and therefore met with disapproval. Leasing can help to eliminate these fears, by ensuring public money is invested wisely.
Personal leasing as a grey fleet management option
For businesses still looking to operate a grey fleet, personal leasing may be a viable financing and vehicle acquiring option. Not only does this also mean the employee can update their vehicle make and model, but it also offers support post sale.
Many businesses opt to give employees a cash allowance instead of offering a company car. This also offers employees the opportunity to claim mileage allowance relief. Encouraging your workforce to have a cash allowance allows them more flexibility, but is also cost effective in terms of time management for business owners.
The cash allowance means the employee is responsible for sourcing their own vehicle, which many prefer as they can opt for a vehicle that meets their personal preference and requirements; it also works out favourably in terms of negotiation time required by the business. The company car opt out is a popular scheme among workers and can also be a valuable option for many different industries.
How should businesses assess their grey fleet management?
The grey fleet report conducted by the BVRLA identifies a number of key ways businesses can manage their grey fleet and ascertain where there is room for improvement. One of the first things businesses should do is to take stock of the information they already document on their grey fleet, for example, costs, which employees are most likely to be affected by any changes made to the company fleet and what objectives the business has regarding fleet management moving forward.
The study notes that in most instances, there will need to be a period of adjustment in which a balance is struck, this will ensure that businesses can still deliver an efficient service while also meeting their objectives for continued improvement.
Naturally, due to the diverse nature of British industries, the usage of company fleets will vary from business to business, so understanding the needs and recording the types of journeys the business is required to make is a key factor in determining the next best steps.
Ultimately, whatever your business needs, there’s no denying that operating a cost effective and efficient fleet is important, regardless of their preferred vehicle acquisition. The Neva C-Fleet app makes managing a fleet easy, with all the information you need about your vehicles and potential repairs in one place.
If you’d like to discuss your business’ fleet requirements with a fleet management expert, contact our skilled team today and let us demonstrate how leasing can transform your grey fleet!