5 tips to mitigate your fleet risk

The worst kinds of risk are those of which businesses are unaware.

Alistair Payne, FleetPartners regional manager, says businesses often don’t consider the risks associated with owning and operating their own fleets. In fact, there is a real risk that businesses are losing out financially because they don’t have the time or the technology to examine what’s really going on when their vehicles are out on the road.

Five ways to mitigate financial and physical risk by turning your fleet over to a fully maintained operating lease

1. Draw up a proper fleet policy

Many businesses have evolved a set of rules around vehicle use over time, adding bits and pieces as necessity dictates. The result is that when something goes wrong, no one is sure who to call.

Payne says a fleet without a policy opens itself up to governance issues and questions about what a vehicle can and can’t be used for.

“The fleet policy articulates usage, times for use and allows the company to maintain a framework that might not have existed previously,” he says.

“It sets the foundation for the way the fleet is managed.”

Scheduling maintenance can be tricky, but with a fully maintained operating lease, the servicing risk is borne by the fleet management company. That means care-free driving for the life of the lease. In short, fleet policy is more than just keeping a list of who’s using which car.

2. Look for savings during the vehicle’s lifecycle

A good fleet management company is non-partisan when it comes to vehicle purchase. It doesn’t recommend Triton over Hilux just because it has a partnership with Mitsubishi.

A fleet company’s role is to provide intelligence about all vehicle options, then guide the customer’s choice to suit their requirements.

Fleet management companies can offer special deals thanks to their position in the industry.

“There are significant discounts in place because of the volumes that we as a business put through various dealers,” Payne says.

“For example, there might be 50 Ford dealers in Victoria. We won’t put volume through all 50, because it doesn’t make sense from a pricing perspective.

“We know we are going to get a much better deal for our clients if we funnel all our Ford requirements in Victoria through a smaller number of preferred dealers.”

Businesses mitigate risk by being able to save at other stages in the vehicle’s lifecycle too. These include provision of maintenance, tyres, and soft cost processing, such as wages, in terms of administration.

Consolidated invoicing through a fleet management company affords the chance to combine invoicing into one monthly statement, as opposed to the paper trail involved with multiple suppliers.

3. Make sure vehicles are fit for purpose

If a fleet’s self-managed, the concept of a vehicle being ‘fit for purpose’ might not have occurred to managers, as Payne explains.

“I consulted with a fleet manager in the health sector recently, and the occupational therapists, who were driving to the end of the road and back to provide massages in a rest home, were driving large SUVs.”

Instead of a large, expensive SUV, a small, four-door hatchback was the right choice for the work required. According to Payne, if the advice given was applied to the fleet, it would cut costs by half.

“So fit for purpose, from our side, is exceptionally important and it’s something that we like our customers to value,” he says.

4. Avoid vehicles running under contract

If a vehicle is on a three-year/100,000km lease, the residual value of the vehicle – what it’s worth second-hand – has been calculated based on that. If it’s returned under those kilometres, the customer has lost a certain amount of value under the terms of the lease.

Many fleet management policies do not adjust for these in-life lease modifications, they set and forget. To counter this tendency, FleetPartners recalculates leases on an ongoing basis. This results in a proactive, pay-as-you-go system.

“If it became apparent at the end of the first year of a three-year, 100,000km lease that the driver is only doing 25,000km as opposed to 33,000, we’d recalculate the lease for the remaining term,” Payne says. “It’s a predictable saving.”

Another plus of having a fully maintained operating lease is that there’s no residual value risk at the end of the lease, because the fleet company owns the car. At the end of the lease, the business doesn’t have to sell it to recover its residual value.

5. Monitor activity with telematics

Every fleet management company offers telematics in some shape or form. FleetPartners’ telematics solution, LogbookMe, is an automated logbook system that eliminates the need for paper logbooks while at the same time differentiating business from private vehicle use, and the FBT applicable.

With LogbookMe, drivers can self-install a small, plug-in device to the vehicle’s OBD port. This telematics recorder tracks utilisation of vehicles to highlight areas where savings can be made, for example where five cars could easily perform the duties of seven. It also records when vehicles are driving on non-gazetted private roads, for which the government provides a tax benefit. Many other applications for LogbookMe can be explored, depending on the fleet’s needs.

For example, if the device is installed in cars before January 6, 2018, businesses can lodge a fully compliant logbook with the ATO based on its records. Industry insiders believe the ATO may decide to make it mandatory for businesses to lodge their logbooks electronically.

“Telematics has a direct play into maintenance costs,” Payne says.

“Harsh braking and accelerating affect maintenance and fuel costs. If drivers know the car’s being monitored, that tends to have a direct impact on the driving pattern of the user overnight.”

Gathering all this information on fuel use, speed, location, and private or business use is only the first step. Having the time to collate it and make fleet decisions based on data is more difficult.