What Is Best For A Company - Grey Fleet vs Company Cars
We have been working with a Peterborough based company looking at how they operate their fleet. The aim, as always, is to save money and increase productivity without compromising quality.
For any small or start-up business, running a grey fleet can seem like a viable option. With no overheads or costs associated with the buying or leasing of company cars, grey fleet offers an immediate solution for business travel.
Naturally this does give the business far less control over what the employees actually drive. Some businesses will be concerned about their carbon footprint, others focus more on the road worthiness of the vehicles. Matters of checking things like employees having motor insurance that covers business travel can also be easily overlooked.
As far as the business we spoke to was concerned, the only cost associated with their employee travel was fuel. Working to the government advisory mileage allowance payments (AMAP's), employees were paid £0.45 per mile up to 10,000 business miles during the year and £0.25 per mile thereafter. The difference in price takes into account the fixed costs of motoring that the employee will incur - insurance, tax, maintenance etc.
Upon drilling down into the mileages being driven by employees, it became clear that an agenda for change needed to be implemented. The method of looking at short-term cash flow, as important as it is, needed to be stretched in order to plan for the future - but not by as long as they thought.
The sales representatives were driving around 500 business miles per week on average. Using AMAP's, over the course of the year, the costs for the mobility of the sales team averages £8,000 per person - equating to £667 per month.
It was only when this figure was put down on paper in plain black and white that the company saw exactly what they were spending. A couple of phone calls later and we had spoken to several leasing companies who would provide maintained mid-sized hatchbacks for £250 per month. With insurance prices added on top of this and the cost of fuel at £0.09 per business mile, as per the government advisory fuel rate (AFR's), we saw a figure of £520 per month for a fully maintained, brand new company car for each member of the sales team and an annual saving of nearly £1500 per driver within the sales team.
Lower costs, a reduction of time in maintenance, safer cars and that new car smell... company cars should not be ruled out as an extremely viable option with start-up companies or small businesses. Grey fleet has the potential to get things moving quickly but is not a long term option for staff who are expected to be out on the road. Whilst there is often an initial rental fee or deposit on company cars, the £0.36 per mile difference between a fuel allowance in a private car compared to a 1.6 litre diesel company owed car soon claws back the difference.
It is all too easy for companies to get caught in the process of focusing on the state of their bank account come the end of the month. If plans can be made for a 3 month period, the reduction in costs associated with running a company car fleet will help any business become more profitable.