Are your vehicles hurting your bottom line?

BUSINESS BRIEFING

Are your vehicles hurting your bottom line?Cars and vans are a vital tool for doing business. They move people, equipment and goods from A to B, but can do so much more. They’re also a significant capital outlay and can make a serious difference to the financial performance of your business. So it’s crucial that you make the right decisions.

Let’s put it another way, wouldn’t you want to increase the profit your business makes by reducing its outgoings? And wouldn’t you want more time back to focus on the things that make your business money, rather than having to spend time on admin that adds cost?

With smarter, more informed choices on your company vehicles you can avoid unnecessary costs, save tying up your capital and help budget for unexpected events, like maintenance or accidents. Make your vehicles work for you and your balance sheet – not the other way around.

We understand the vital role that your vehicles play in getting the job done, but getting it wrong could be costing you more money now and in the long run. That is why we’ve put together this guide to provide you with some essential and practical advice to get it right.

You may not have had the time to do loads of research last time you sourced your current car or van. But taking two minutes to consider the bigger picture and keeping it in mind when you’re looking for your next vehicle can make a big difference to the success of your business.

BUSINESS BRIEFING

Vehicle downtime costs a business around £3,635 per year as on average each vehicle

spends 5-6 days a year o� the road.

£3,635Businesses can reclaim half the VAT

charged on rental payments and 100% of maintenance costs for leased cars.

40%

The average small or medium sized business spends nearly 192 hours every year managing their company vehicles.

192 hours

50% VATBack

Did you know…

Using the wrong vehicle for the job can be costly. But not just in fuel costs and efficiency. Incorrect, mismatched payloads and specialist equipment all put extra strain, wear and tear on a commercial vehicle. If you’re using a car rather than a van to transport goods, will your employees be safe in the case of an accident? It can be an expensive mistake if your new vehicle doesn’t meet your needs or isn’t flexible enough to handle multiple jobs.

The driving style of the person behind the wheel is as important as vehicle consumption figures. Fuel costs are one of the biggest expenses for any vehicle fleet so it has a big impact on your balance sheet. Which is why businesses spend a lot of time considering fuel consumption figures for different vehicles. But the way your employees drive is actually one of the most influential factors on the rate at which your vehicles burn through fuel and money. Do you know which of your employees has the ‘heaviest’ right foot?

Even the toughest commercial vehicles need TLC. The loading doors on a van could be opened over 100 times a day – which works out at over 30,000 times a year. Regular servicing and maintenance helps avoid small problems turning into big, expensive ones.

1 Autoglass survey of 250 Fleet Managers 2015 2 Driver and Vehicle Standards Agency (DVSA)3 The elements of specifiying lcv’s successfully 4 Funding the conversion of your lcv’s

Five major UK cities plan to introduce Clean Air Zones in 2020.

Vehicles lose as much as 40% of their value within the first year

Cars and LCVs record an MOT final fail rate of 28%

40%28% 2020

Vehicle downtime costs a business £727 per day

£727

Vehicle downtime costs a business around £727 per day and on average each vehicle spends 5-6 days a year o� the road.

£3,635Businesses can reclaim half the VAT charged on rental payments and maintenance costs for leased vehicles

40%

The average small or medium sized business spends nearly 4 hours each week managing their company vehicles.

192 hours


80% of new vans require conversion to be fit for purpose


80%28% £727


Vehicles lose as much as 40% of their value within the first year


40%28% £727

40%28% £727

2481.867 px-1912.034 px

A number of major UK cities plan to introduce Clean Air Zones in 2020.

Vehicles lose as much as 40% of their value within the first year.

Cars and LCVs record an MOT final fail rate of 28%.

40%28% 2020

Vehicle downtime costs a business £727 per day.

80% of new vans require conversion to be fit for purpose.


80%28% £727

Unplanned maintenance issues take a vehicle off the road for an average of 5 to 6 days at a cost to the business of £7271 per day. That’s the cost for replacement vehicles and wasted time. In worst case scenarios the actual cost could run into thousands of pounds in lost business or reputational damage.

In 2016, 28%2 of cars, passenger vehicles and commercial vehicles failed their MOTs completely Making them unusable until you've spent time and money to rectify the problems. That’s over a quarter of vehicles off the road due to poor maintenance or simply being run into the ground.

New, regional Clean Air Zones (CAZs) could make some of your vehicles redundant or too expensive to operate in certain areas. Older, less efficient and more polluting vehicles are already restricted in central London. With a number of major UK cities already working on plans for new Clean Air Zones, as well as local initiatives in Oxford, Bristol and across Scotland, make sure you know where your vehicles need to access before you choose between petrol, diesel, electric or hybrid.

BUSINESS BRIEFING: www.alphabet.co.uk

Over 3,000 people an hour3 will see the signage on a vehicle. We all know the importance of first impressions. Many people will judge the quality of your business or product through a tangible symbol, such as your company vehicle. It’s a calling card for your business – if you drive an old, rusty, uncared for vehicle it doesn’t portray a positive image of your business, no matter how good your service.

80%4 of new vans require some form of conversion beyond the simple plywood lining, to ensure they are fit for purpose. This could add a hefty price tag to the original purchase price and one which you might not have accounted for.

2

The following checklists will help you ask the right questions.

7 things to think about before ordering your next company vehicle

Whether you’re adding a car or commercial vehicle to your fleet – or replacing an existing one – you need to know the right questions to ask in order to make the right choice.

It’s an important investment so spending some time thinking about the following questions will pay off in the long run.

1

2

3

4

5

6

7

Cashflow is critical, so what are your options? Have you worked out the cost and VAT savings between leasing a vehicle over the next three to five years, versus the capital you’ll need to buy and maintain it? With leasing you'll also be protected from fluctuations of used vehicle values in future.

What will be the vehicle’s annual mileage? 30,000 miles per annum works out at around 576 miles per week. Understanding how many miles your vehicle will need to travel during the year is key to leasing it efficiently.

Is the vehicle really ‘fit’ for your purposes? Is it flexible enough to meet a number of roles in your business? Consider the number of doors, body style (e.g. saloon or estate), fuel consumption, fuel type and vehicle size (height, width, length and weight).

How do the tailpipe emissions impact on cost? Have you considered the CO2 output of the vehicle and its implications for your costs, such as Benefit In Kind (BIK) taxation, National Insurance contributions and Vehicle Excise Duty?

Is petrol versus diesel still the only choice? Have you compared the costs over the life of the vehicle against an electric vehicle or a hybrid? Will you need to access one of the UK’s proposed Clean Air Zones (CAZs) or Zero Emission Zones (ZEZs) in the future? Euro 6 diesel and Euro 4 petrol are the latest emissions standard for the cleanest, most efficient internal combustion engines. If electric or hybrid can be the answer for your business, how will you charge it?

What about the additional costs? Do you know your expected service and maintenance costs over the next few years? It could be cheaper and easier to have a maintenance package which covers your costs for servicing, maintenance, tyres, brakes, clutches, etc.

Is there a way to make things easier? Does your business have a ‘vehicle policy’ to help simplify and standardise your van or car selection for employees? Does the proposed vehicle fit your policy? Is your policy still ‘fit for purpose’ or does it need to be reviewed?

Five major UK cities plan to introduce Clean Air Zones in 2020.

Vehicles lose as much as 40% of their value within the first year.


40%28% 2020

Average mileage per week for a 30,000 mile lease contract.

576miles

BUSINESS BRIEFING: www.alphabet.co.uk3

5 ways to save money on servicing and maintenance

The biggest risk factor and cost influencer of any vehicle is the driver. Do you know which of your drivers uses more fuel than the others? They may be the ones with more speeding tickets. The harder a vehicle is driven, the quicker and more likely key components such as tyres, brakes and clutches wear out – adding to your business’ costs.

Keeping the vehicle serviced and maintained ensures your employees are out working and earning. It’s also important for employee safety and living up to your ‘duty of care’ obligations as an employer. Maintaining the vehicles to a high standard can also help you avoid unexpected charges at the end of your leasing agreement if the vehicle has not been looked after properly.

Don’t put off maintenance when it’s required. It’s a false economy. Small, inexpensive problems can quickly escalate into bigger, expensive issues if they’re ignored and not addressed. It could also be dangerous for your employees in some instances.

Hope for the best but plan for the worst. No one likes to think about accidents involving your vehicles but sadly they’re a fact of life. Do you have accident management in place to provide practical support (such as a replacement vehicle and to help get the damaged vehicle back on the road as quickly as possible) plus advice if the vehicle is off the road due to a collision? It’s only in situations when the worst happens that businesses see the true value in this service, which is why Alphabet provide it as standard.

How much of your time is taken up by the administration of your vehicles? Time is money. Licence checks, managing MOTs and Road Fund Licence, organising servicing, handling breakdowns and arranging replacement vehicles all need to be done to keep the wheels in motion. But all this administration takes up valuable time and with changing legislation it’s easy to get it wrong. Wouldn’t it be better handled by the experts as part of an overall maintenance package for your vehicles?

1

2

3

4

5

Risk factor

Servicing

Maintenance

Accidents

Admin


5 essential steps towards your next commercial vehicle

Cashflow is the lifeblood of any business. In times of uncertainty, cost and VAT savings from leasing your next commercial vehicle – rather than buying it outright – has a huge appeal. It gives your business the certainty of monthly payments to stay mobile, as well as helping to budget for servicing and maintenance costs. The costs for vehicle conversion (which can be a significant outlay in itself) can also be included in a leasing agreement too.

Get the vehicle sized right. How much empty space are you carrying? Or are you overloaded? Specifying your commercial vehicle shouldn’t be undertaken lightly or quickly. These vehicles usually have a working life of five or more years, so a quick decision could be costly in the long run. Take the time to understand the jobs it needs to do, the areas it needs to access and the people who will use the vehicle every day.

Do the numbers and don’t just think diesel. Don’t get us wrong, diesel absolutely has its place in a vehicle fleet, but if these vehicles need to access London or one of the other Clean Air Zones planned around the UK then you may need to look beyond even the latest diesel technology. Petrol and electric commercial vehicles are increasingly popular and hybrids are on the way. Just because you’ve ‘always done diesel’ doesn’t mean it’s going to be right for your business going forward.

You won’t get a second chance at making a first impression. Don’t miss the opportunity to add branding to your vehicle – it’s a highly visible advertisement or calling card for your business, as much as it is a mobile workplace for you and your employees.

Think broader, think different. It’s easy to replace existing vehicles with the same models, only newer and with a few more features. But when was the last time you really thought about the jobs that these commercial vehicles do for your business, the journeys they make and the other purposes they could serve? Could different vehicles give your business more flexibility and an advantage over the competition?

For more best practice guides on what to do and what to avoid when ordering your next commercial vehicle visit www.alphabet.co.uk.

1

2

3

4

5Vehicle downtime costs a

business £727 per day.Vehicles lose as much as 40% of their value within the first year


40%28% £727


Remember… to avoid unnecessary costs and unplanned vehicle expense

With so many choices and factors influencing the choice of your next company vehicle, it’s easy to simply do what you’ve always done. But in business that’s never the right solution. Trust Alphabet to help make sense of it all and enable you to concentrate on the day job.

Schedule servicing and have a ‘plan B’ Regular vehicle servicing and maintenance needs to happen to save costs over the long run and ensure the safety of you and your employees. Make sure you have a plan in place for short term replacement vehicles to ensure your business isn’t disrupted, your employees remain productive and your customers aren’t let down.

See our downtime management guide for more tips and advice. Visit our Driver Services page on our website to view the guide.

Predict and control your costsThis doesn’t need to be complicated or time consuming – there are tools to help.

Our free app, Alpha Guide (which can be downloaded via the Apple Store or Google Play Store), can help you to track business mileage and even search for electric charging points and garages while out and about.

Take away some of the admin headaches around managing your vehicles and controlling their costs.

BUSINESS BRIEFING: www.alphabet.co.uk

Consider leasing your next vehicleLeasing is a great way to get more for your money and afford a better standard of vehicle.

Fixed-term rental instalments will mean your business can stay cash-flow positive in the short and long term. It can also help you manage the cost of commercial vehicle conversions.

Servicing and maintenance costs can be controlled with a maintenance package to keep your vehicles productive and on the road.

Work with an expert to help you specify the right vehicle for now and in the futureThere are lots of choices to make when considering your next company vehicle that will affect its cost to your business. A leasing company like Alphabet can help advise the best approach to navigate the options.

You may or may have not considered hybrid or electric vehicles previously, but have you looked at the potential cost savings? Depending on where you drive and how you use your vehicle, it could be a viable option.

Our guide to specifying commercial vehicles will help you ask the right questions when choosing your next van. Visit our Driver Services page on our website to view the guide.

6

Make your fuel go further The slower you burn fuel, the more cash you keep in your pocket. Some simple, practical steps could cut your fuel consumption by 10%.

An easy way to do this is to shop around for fuel, rather than leaving it to the last minute to fill up. Also, don’t carry unnecessary weight in the vehicle, make sure tyres are inflated to the correct levels and know which of your drivers have the heaviest right foot.

Improved journey planning through telematics can also make better use of your fuel spend and employee time with intelligent sequencing and real time traffic information.

Know the tax implications of the vehicles you driveMake more informed decisions about your next vehicle and which ones are the smart choices to help reduce your tax liability. Our tax calculator (which can be found on our website) can help you work that out.

Make sure you stay updated with the latest changes to Benefit in Kind (BIK) Tax and Road Fund Licence from April 2019 and planned through to 2021. Visit the Driver Services page on our website to view for our CO2 and BIK tax guide.

The way that emissions from vehicles is calculated is changing from September 2018 with WLTP. If you’ve not heard about it before, visit our website to read our comprehensive guide. Protect your capital and still drive the

latest, safest and cleanest vehiclesThrough leasing newer, cleaner, safer and more fuel-efficient vehicles your business can save money in the long run through cost and VAT efficiencies.

Leasing your vehicles also protects your business’ capital so you can spend it on those things that will really drive your business.

Changing your vehicles on a three or four year ‘cycle’ will also help future proof your business to comply with future legislation such as Clean Air Zones. Visit our website and view for the latest developments and thinking.

The answer is Alphabet


Alphabet (GB) Limited, Alphabet House, Summit Avenue, Farnborough, Hampshire, GU14 0FB. Tel: 0370 50 50 100.Registered office address: Alphabet House, Summit Avenue, Farnborough, Hampshire GU14 0FB. Registered in England and Wales 03282075.Alphabet (GB) Limited is authorised and regulated by the Financial Conduct Authority.

Disclaimer: The information provided in this business briefing is for general information purposes only and is correct to the best of our knowledge at the time of publication (April 2019). Neither Alphabet nor the author can be held responsible for any actions or consequences arising from acting on, or refraining from taking any action, as a result of reading this.

ALMAR 073.3Expiry 29.04.20

Are your vehicles hurting your bottom line?

Documents

Transcript of Are your vehicles hurting your bottom line?