• Reduce your fleet costs
• Products and services
• Online services
• Case studies
• Fact sheets
• Smoking legislation
• Corporate manslaughter
• Environmental management
• Car tax guide 2011/2012
• Managing down fleet costs
• Managing down end-of-lease charges
• Using whole life costs to drive down fleet expenditure
• Electric vehicles
• Useful websites

Using whole life costs to drive down fleet expenditure

Jump to:  
               Using whole life costs to drive down fleet expenditure
               Take a fresh look at your fleet policy
               Whole life cost management in action
               What does whole life cost vehicle management involve?
               Take action to deliver fleet cost savings

Using whole life costs to drive down fleet expenditure  

Traditionally rental cost, generated by a simple calculation based on the finance and maintenance costs of a vehicle at the point of acquisition, have been the driving force behind customers fleet policies. However, Hitachi Capital Vehicle Solutions is working to with our customers to change this.

The term 'whole life cost' refers to the total cost of running a vehicle over its life. By looking at the whole life cost you get a clear understanding true cost associated with running a vehicle. Looking solely at the monthly rental gives you sight of only a part of a vehicle's expense.

When reviewing the whole life cost of a vehicle, Hitachi Capital Vehicle Solutions takes into account the outlay tied up in the monthly rental but, in addition to this, we look at the less visible elements. Our analysis includes:

• Rental costs
• Disallowable VAT
• Class 1A NIC
• Corporation tax
• Insurance
• Fuel

You may be surprised at what a whole life cost analysis of your fleet reveals. A cheaper monthly rental doesn't necessarily mean that a vehicle will be the cheapest option for your business, it is possible for two vehicles with the same monthly rental charge to have very different whole life costs.

Well informed businesses can make considerable savings by managing the whole life costs of their vehicles.

Top

Take a fresh look at your fleet policy   

The example below shows how the whole life cost of a vehicle is calculated.

In this example, a driver with a monthly rental allowance of £550 per month would not be able to choose the BMW 3 Series as it would be outside of their price range.

However the BMW 3 Series is actually the cheaper vehicle when looking at the whole life cost, offering a saving of more than £54 a month over the Ford Mondeo.

The BMW 3 Series offers better fuel economy and a lower monthly Class 1A NIC cost so the business would benefit financially by offering this vehicle over the Ford Mondeo, which at first appeared cheaper. If you had a fleet of 100 vehicles, making this change could generate a saving of more than £65,900 a year.

In addition to the financial savings made the business, by choosing the BMW 3 Series the driver of the vehicle would benefit from lower benefit in kind taxation due to the vehicles lower CO₂ emissions. The driver would also be given the opportunity to drive a more expensive and higher status vehicle, improving staff moral and motivation.

Top

Whole life cost management in action  

Taking a whole life cost approach can have a real impact on your fleet spending.

Hitachi Capital recently undertook a whole life cost review for a leading utilities provider. Our analysis revealed that, by limiting the CO₂ emissions of available vehicles to a maximum of 160g/km and taking into account Class 1A NIC, a saving of more than £600,000 a year could be made. This equated to a saving of more than £62 per vehicle per month.

Top

What does whole life cost vehicle management involve?   

Traditionally businesses have worked to reduce their fleet costs by restricting vehicle choice, negotiating better terms with their supplier or manufacturers or using a panel of suppliers and opting for the provider that offers the cheapest monthly rental for each vehicle they require.

These methods can generate initial benefits but, over time, these are eroded away and can result in other issues such as a complicated network of fleet suppliers to manage or a negative impact on staff motivation through an increasingly restricted policy or introduction of lower status vehicles.

Hitachi Capital Vehicle Solutions works with customers to look beyond the monthly rental figure in order to generate long-term cost savings through whole life cost benchmarking.

Working to a whole life cost model may challenge your existing fleet policy. Following an in-depth cost analysis, drivers may be able to choose higher status vehicles that are currently outside of their monthly rental allowance.

In a whole life cost approach, drivers are often given a higher monthly allowance as this budget takes into account the true running costs, not just the monthly rental. Your drivers can then choose any allowable vehicle with a whole life cost up to this figure. Alternatively, allowable vehicles can be divided into bands with drivers able to choose any vehicle within their band. We can build tolerances into the vehicle list to ensure that vehicles remain within agreed bands. Where required, the vehicle cost can be hidden so drivers see only the vehicles to which they are entitled.

Working with Hitachi Capital to manage your fleet on a whole life costs basis offers many benefits. These can include:

• A true indication of fleet costs
• Control of your bottom line spending
• Lower CO2 emissions across the fleet
• Increased staff motivation

Hitachi Capital offers you a transparent and understandable pricing structure. By putting all the facts at your finger tips, we are able to support you in making the right choices for your business.

Top

Take action to deliver fleet cost savings 

Hitachi Capital Vehicle Solutions is committed to delivering savings for our customers through whole life cost analysis. To support our staff and ensure we are offering the latest, independent advice we work with KPMG, a leading provider of professional services including audit, tax, financial and risk advisory.

Using KPMG's carWISE fleet modeling tool, we are able to independently forecast the cost of acquiring, operating and disposing of company cars and light commercial vehicles (LCVs). This tool can also be used to calculate cash allowances, including the financial impact on employees.

You can be confident that the information we provide is:

• Independent
• Accurate
• Tailored to your business circumstances

We are able to factor in costs such as insurance, fuel reimbursement rates and your own manufacturer support terms. Any information that impacts on the cost of the vehicle can be included.

Call us today on 01635 574 640 or email us to arrange your free fleet review.

Top