As a consultant in the fleet industry I see many companies whose vehicle policy has just evolved with time and probably never been properly reviewed. When I speak with these clients I usually find that they are daunted by the sheer quantity of data and variables. Finding a fleet review to be a massive task many companies follow the herd and adopt a policy of doing what other similar fleets do, or simply look for another less daunting project.

Just like our clients we can also find the mass of statistics and incomplete information we receive from clients intimidating, but with a little pre planning and a good understanding of what the client is trying to achieve we can avoid a costly and painful process.

Look at the way fleet decisions are made by Quick & Sloppy Ltd. Having taken advice from their leasing company that contract purchase was the way to finance a £40,000 Mercedes they merrily adopt this for the next 200 cars they buy. When it comes to cash alternatives the allowance is equal to the PCP cost of a similar car, then rounded up or down a bit depending on grade. One person handles the fleet decisions and the policy is reviewed on a “regular” basis, the last time being when the Cortina was discontinued.

Another company Spreadsheets R Us Plc has a working party of all concerned, reporting to a focus group, which presents the optimum funding policy and individual cash allowances to the board every month. Each figure is accurate to the penny, and employees receive the option of a cash allowance that keeps them in a neutral position (adjusted for inflation and unforeseen events). Unfortunately working with 15 leasing companies and explaining 500 cash allowances requires several extra members of highly qualified number crunchers.

Of course Quick & Sloppy Ltd and Spreadsheets R Us Plc are purely fictional, but if they were real how would we advise them to manage the drivers’ cash allowances?

The difficulty in providing a cash allowance comes about because of the drivers’ needs and aspirations. If John drives 22,000 private miles in his company car compared to Bob’s 3,000 (in an identical vehicle) and they are each to receive cash allowances which keep them in a neutral position, John will need more money simply because his car will depreciate faster than Bob’s.

We advise that the company should start the process by grouping employees who are in a reasonably similar position. This may be by grade or even just essential and non- essential users. This will allow the company to select a benchmark car for each group and then base the cash allowance on a set of circumstances for a typical employee of that group. Although this will create winners and losers, this process is a good middle ground and is likely to be reasonably fair to the employees but without creating an unmanageable amount of admin for the company.

Obviously the more groups a company analyses the more accurate the results will be. However the cost of doing the analysis and communicating the options to staff will need to be taken into account.

Because the UK car market is awash with choice, and cars will always be emotive balancing the financial and non financial needs of the company with the aspirations of the staff is almost impossible. Despite this, there are many fleets which are financially well managed and contain motivated company and privately owned drivers.

David Rawlings
Senior Manager
Deloitte & Touche