From Grey to Green: Why Car Fleet Leasing is the New Black
Fleet management services are in pole position when it comes to helping organisations take better control of their company car policy.
Businesswire reported that the business car fleet leasing market in Europe is forecast to grow at by 4.03% during the period 2017-2021. Fleet Industry News found that corporate car leasing has grown by 6.6% year-on-year in the UK, and every indication points to this as a continuing trend. Car fleet leasing is gearing up to overtake ‘own vehicle’ policies as companies are educated on the risks of managing a grey fleet for business travel.
Business fleet management: Going from grey to green
The increase in the popularity of car leasing as an option for employers can be traced, in part, to the advent and popularity of hybrid cars. Hybrids are advantageous because of their low C02 emissions and the company could save on taxes thanks to government schemes that reward the reduction of their carbon footprint.
In the UK, businesses will benefit from corporation tax relief and allowances, and lower National Insurance contributions. In Ireland, the 2017 budget affirmed tax relief for hybrid and electric cars. The Irish Times reported that electric vehicles are entitled to claim VRT relief of up to €5,000. Hybrids can claim relief of €1,500, while plug-in hybrid vehicles can claim €2,500.
It’s clear that operating a green fleet for business offers a future-proof option for employers; the reduced tax burden undoubtedly benefits employees and employers alike.
Grey fleet means grey areas
While having grey fleet drivers can be beneficial for businesses whose employees do not drive frequently or over long distances, mileage, accidents and maintenance are difficult to manage. In many instances, companies could be failing in their duty of care by not keeping a more watchful eye on grey fleet operations.
Leaving full maintenance responsibility in the hands of employees - in addition to their already heavy workloads - can potentially cause problems for employers. In 2016 in the Republic of Ireland 1,465,702 cars underwent the National Car Test (NCT). The average pass rate across the country was 48.2% while the failure rate was 51.8% - proof that roadworthiness is hit-or-miss across the nation. Additionally, for employers who use a grey fleet, it is often unclear who is liable for vehicle and employee in the case of an accident. It is these grey areas that show the pitfalls of this model of operating cars for business. The current national road safety campaign is aimed at employers and addresses these safety concerns.
A further uncertainty for both employee and employer using grey fleets is that the employee must calculate their own mileage – this is often a difficult and problematic task. Accordingly, from an employer’s position, grey fleets demand close administrative inspection to ensure that mileages are calculated correctly and corroborate with figures from the employee. This additional paperwork combined with the stressors of vehicle maintenance and safety creates significant margin of error and miscalculations could foster disharmony between employee and employer in the working environment.
Mobility without uncertainty
In contrast to these uncertainties, car leasing offers a precise and cost-efficient option for SME employers seeking to make smart fiscal and environmental decisions as well as prioritising their employee safety and work performance. The Vehicle Leasing Association of Ireland (VLA) have identified some of the attributes that they believe set corporate car leasing apart from grey fleets such as:
- Breakdown coverage
- Accident management
- Vehicle replacement
- Vehicle administration
- Day-to-day driver communication
The VLA believe that these key services that are integral to the success of car leasing because they offer innovative business vehicle management solutions. Corporate car leasing hands issues of reliability, safety and administrative ease over to an external fleet management services partner, offering peace of mind to employers and employees alike.
Fleet management services result in better budgeting
Subscribing to a car leasing package in an agreed-upon payment installment plan during a clearly stipulated contractual period ensures that employers can devise their monthly and yearly budgets without worry of unexpected costs or issues.
Vehicle repairs or accidents will not culminate in any out-of-the-blue costs, and complex administrative tasks will be handled by the business fleet management company. Additionally, business car fleet providers are generally keen to build up personal relationships and rapport with employers in Ireland, that there is room for negotiation of contracts, particularly in the case of repeat business or large amounts of vehicle leasings.
Choosing vehicle leasing over the grey fleet model of car use for business will result in corporate and Benefit in Kind tax breaks. This is in addition to the legal and moral advantages of working with an external corporate car specialist to protect employees. With the leasing company taking care of administrative and day-to-day vehicle maintenance, companies who choose business fleet management services choose certainty. Cost concerns are negligible compared to the value of peace of mind.