Managing daily rental costs
Recent results from the Fleet News Confidence survey highlighted the growing concerns amongst fleet operators about the spiralling costs of daily rentals. Many fleet managers are currently reviewing rental spend in an effort to reduce the overall cost of their fleet, but are they doing enough to ensure they maximise the full potential of what should be an effective complement to their existing leased vehicles?
Daily rental offers companies a flexible alternative to the pool car, making vehicles available to staff according to their varying needs without sitting as a depreciating asset on the company's books or attracting the service and maintenance expenses of the pool vehicle. Using rental cars can also give businesses additional peace of mind to know that staff aren't making ad hoc journeys in their own private vehicles, thanks to the systematic safety checks in place with a standard rental process. So if rental is such a convenient and cost effective option, what suddenly seems to be going wrong?
Is daily rental the best solution to short term vehicle requirements?
The concerns highlighted by the FN survey clearly show that businesses are beginning to experience nagging doubts about daily rental as the best answer to their short term vehicle needs. With employee benefits being squeezed in the current economic climate, suspicions seem to be forming amongst fleet managers that staff perhaps see the rental car as a temporary perk that they now have a golden opportunity to exploit.
Given freedom of choice from the rental list, staff may be inclined to pick vehicles with more powerful engines than they are used to, or a higher grade of vehicle with a luxurious specification. A smaller, fuel-efficient car might be more than adequate to fulfil the requirements of that particular journey, but without any monitoring of the rental process in place, this level of excess is likely to go undetected, especially in larger organisations.
Additionally, either through a lack of time or understanding about the costs involved in daily rental hire, employees will often order cars far sooner than they need to be delivered or end up keeping them for longer than their actual business need dictates. Perhaps they are even using multiple suppliers? Often employees will arrange for delivery of a hire car the night before it is required for peace of mind or for the sake of convenience; but sometimes this can manifest itself in a Monday morning hire being delivered on Friday afternoon. This expense, whilst understandable from a layman, would be unforgivable in a managed environment.
Fleet managers know this type of hire behaviour is costing them money, but with continual pressures to improve the strategic performance of their fleet, many simply don't have the capacity to bring this situation under control.
Managing down costs
Often an effective first step towards reducing costs is to look at changing or consolidating rental requirements to one supplier. Many companies have stuck with the same rental provider for a number of years, simply because it is perceived as more difficult and costly to change rather than source an alternative. But by dealing directly with the rental provider, companies could leave themselves open to more substantial costs in the long term.
The key cost-saving issue for most businesses lies in moving rental choice from a driver-based decision to a policy driven one. Outsourcing the management of rental needs to an intermediary such as a leasing provider helps to redress the balance and put the control back into the hands of the fleet manager.
From the beginning of the relationship, a good leasing provider will undertake a complete audit of the company's rental requirements. Its rentals team will assess exactly which staff need rental vehicles and for what reason, which then allows them to respond quickly and appropriately to each request. By ensuring each rental experience is specifically tailored to the individual driver, the managed solution can not only reduce wasteful hire charges but minimise driver downtime and help businesses get the most out of their workforce on the road.
The intention is not to make rental more difficult but to integrate an element of control into the process, which ensures the company is getting the best value from its staff, vehicles and expenditure. This means that drivers only spend the minimum amount time required in rental cars, which cumulatively could reflect reductions in rental length of as much as 20% on the same number of hires, when using a managed solution.
Allowing a leasing provider to manage the company's rental programme alongside the existing leased fleet means that the two services can act as a cost-efficient complement to each other. The rental and customer service departments work together to ensure that any spare vehicles from former employees yet to be reallocated can be reutilised effectively and fulfil any temporary hire needs, rather than incur an additional rental charge.
Of course, using an intermediary to look after the company's rental requirements attracts a management fee, but in terms of the overall cost savings that are easily achievable, with minimum input from the fleet manager, the long term value to the company of using a managed service is priceless.
How do you ensure that you're getting the best from daily rental hire?
Make sure you ask the following questions to analyse your company's rental needs
Why do my staff need to hire vehicles?
How many people need to travel?
What is the journey type? (motorway, B roads, short city route)
When do they need to travel?
Do they need to carry equipment?
If you would like to find out more about how Hitachi Capital could help you to manage down your daily rental costs, call us on 01635 574 640.
