Fleet funding review “now urgent” says expert

Fleet operators should now be reviewing their overall funding strategies as a matter of urgency, says Fleet Audits, the leading consultancy for business travel optimisation.

“There are now several critical factors which make a full review a high priority” said Stewart Whyte, managing director of the consultancy. “There is clear evidence that several contract hire and leasing providers are cutting back on new client underwriting, so reducing choice and flexibility for fleet managers.

“Several of our recent clients have also reported that in some cases there is a clear reluctance on the part of their suppliers to replace contract-expired units with new ones.” said Whyte. This seems to be based on reluctance to crystallise the inevitable losses on disposal. Contract extensions are now actively being promoted by certain companies.

“Although we don’t yet have all the fine detail, we know enough about the shape and provisions of the new corporation tax/ writing down allowances to make adequate estimates of the full after-tax cost implications for fleet operators. Businesses which need to run cars emitting over 160 g/km CO2 really must re-examine their policies and costings to ensure they will avoid major price shocks for new deliveries after April 2009.”

The full detail of the Treasury proposals will be released with the Pre-Budget Report papers on Monday 24th November. The consultancy will be doing an intensive study of the implications so that it can offer full, relevant advice to its clients.

It is generally accepted that leasing higher-emitting cars will be less expensive after-tax than buying them outright – but the complexities of costs, lease rental levels and CO2 means that just following the general pattern could be expensive. A case-by case analysis – at least in the early stages – may be needed.

“All fleets really need to grasp the fact that this is not just an academic accounting issue” said Whyte. “It is really vital that the funding strategy is reviewed to establish any downside risks, and opportunities to reduce overall fleet costs. It’s also essential for the allocation policy to be reviewed in the light of the new reality, with serious consideration of the cost implications of continuing an open-choice policy.

“The difference between a ‘right’ decision and a ‘wrong’ one can easily top £750 per car, at the after-tax stage. This is far too much – especially in today’s climate – for any fleet to ignore.”