FLEET LEASING : Pain at the Pumps – Cutting the Costs of Company Cars

While there is currently lot of talk about the problems of peak oil and the impending end to the age of the automobile, the simple fact remains that many businesses still need cars. Getting out to visit clients, meeting up with business associates and delivering information and goods is just as important as it has always been.
So, as the price of oil hits new highs on weekly basis and the talk of an economic downturn gets louder, it’s the perfect opportunity for fleet management companies to step in and manage business’ or organisation’s fleet, according to Geoff Tipene, managing director of Custom Fleet NZ.
More than 100,000 vehicles travelling on Auckland’s Southern Motorway pass right by Tipene’s office in Mount Wellington every morning, so there is good chance that some of them are being managed by the GE Commercial Finance-owned business. Custom Fleet began operations across the Tasman more than three decades ago and, in various guises, has now been managing New Zealand-based fleets for more than 15 years. Custom Fleet has about 32,500 vehicles under management, from passenger vehicles to heavy commercials and everything in between. Its 2500 current clients all have different needs, with some requiring more than 1000 vehicles to carry out their business, while others might only have one or two cars.
Over the past decade the company has grown to take leading share in the New Zealand fleet management and leasing market, and Tipene says that growth remains strong, despite predictions of economic doom and gloom. “When companies are looking to free up some capital, we will look to help them through our Sale & Lease Back process. Selling their fleet to us and then leasing it back makes perfect sense. On day-to-day level the company doesn’t notice any change, we just go in and do valuation of the vehicles in their ‘car park’, write them cheque and help them with any new vehicles they might need. The only difference the company notices is larger bank balance.
“And even if the business wants to hold on to its vehicle assets, it still makes sense to use fleet management company, especially when you have large fleet. If you’re dealing with hundreds of vehicles, the last thing you need is half dozen staff who are employed just to manage all the company cars. So they can outsource their fleet management to us, we can maintain the vehicles, ensure they’re all registered and warranted properly, and also make sure they are up to health and safety requirements.”
The soaring cost of petrol at the pump is hitting the consumer hard and businesses are not immune to the pain. The larger the fleet, the bigger the impact, with rise of just few cents ballooning to massive increase in costs for companies with large fleets. Part of Custom Fleet’s job is to help its clients deal with the impact of these costs, although Tipene says it’s not just matter of convincing the client to trade in its bigger cars for more economic models.
“Our role is not to suddenly stop everybody from using cars with six cylinders. Our first ‘port of call’ is to look at the overall numbers, ensure that company’s drivers are fully educated about efficient driving practices and that the vehicles are receiving up-to-date servicing; all of which can have huge impact on fuel consumption. Businesses can’t stop what they are doing but they can do it better.”
Driver training is designed to show drivers the most efficient driving methods, and Tipene says Custom Fleet treats it as science. “In Australia we have launched programme that measures the carbon footprint of fleet down to the individual driver level, then measures improvement over period of time, and from that we can see if the driver has habits they could change. We will be launching this new product to the New Zealand market later this year. We cannot actually force the individual driver to do anything, so we offer suggestions and solutions that will improve vehicle running costs and provide any assistance the client may require to help implement them.”
To maintain this science, Custom Fleet gathers and collates huge amount of data. The New Zealand customer service area receives between 400 and 500 telephone calls day, ranging from requests for authorisation to basic servicing needs, and Tipene says this allows the company to pick up trends very quickly. Overseas trends are also followed closely by the management team, who stay in close contact with vehicle manufacturers and distributors, with further information coming from the wider General Electric group. With GE Commercial Finance controlling more than 1.5 million vehicles around the world, Tipene says it allows Custom Fleet to watch trends in areas such as Europe and North America, and plan for their inevitable arrival on local shores.
Soaring fuel costs also have one other benefit, according to Tipene. “One good thing about rising fuel prices is that they are driving vehicle and engine technology at faster pace. Technology that was slowly being worked on over the past few years is now seen as lot more important, and we’re going to see all sorts of new equipment and ideas coming through over the next few years. Recessions reward innovation, and you’ll never see that expressed better than in the automotive market at the moment.”
This new technology and research is not just limited to finding ways of making cars more fuel efficient, it is also focused on environmental concerns. Orix is one local fleet management company that is leading the way in this field, and is now in the process of ensuring its fleet has carbon zero certification.
Orix strategic account development manager Eve Hansen says the company has spent the past year working to become carbon certified, and that it was move that was mainly driven by its customers. “It’s point of difference from other fleet leasing companies, but it’s also part of the way business in general is moving towards dealing with environmental concerns. This is what customers want to lease and we’re in the business of giving them that option. Our customers are very excited about the idea, and we’ve already had some very positive feedback from some companies that have agreed to act as guinea pigs for the scheme.”
FleetSmart is another major player in the New Zealand fleet management business, managing some of the country’s biggest local government fleets, and is another business that has recognised that cost isn’t just about money. The company’s combination of environmental and economical values has been realised with its EcoFleet service, which helps its clients understand the ecological impact of their vehicles, while also helping the bottom line in terms of fuel cost reduction and better vehicle residual values.
Like the Orix move, the EcoFleet programme is driven by the company’s clients, according to FleetSmart business development manager Christopher Young. He says the company’s government customers have set the pace with green vehicle initiatives, showing private companies how it should be done. Young says the technology for cleaner emissions can lead to higher running costs, but that costs could fall in the long term. “New technology is always expensive, but as it becomes more popular, price always drops, especially when this technology is moving so fast due to the fuel price spike. Also, there is good chance the Government could bring in legislation to ensure all companies have vehicles with emissions-reducing technology, so it’s good idea to get in before that happens.”
The company, which sells about dozen cars day on behalf of clients, has seen the demand for bigger vehicles fall dramatically, and Young says it is getting to the point where those attending vehicle options can pick up four-year-old Commodore for about the same price as more fuel-economical Corolla.
But Young adds that in times of high fuel costs, company car is still major incentive for attracting high-value employees. “They are still significant part of remunerat

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