Reviewing your current car policy can lead to a number of opportunities for potential cost saving.
A potential area for cost saving is to consider extending the contract period to take advantage of potentially lower average annual contract rentals from a longer period of hire - the saving in lower depreciation charges is likely to outweigh increases in maintenance charges.
Many organisations run their vehicle fleets over a 3 or 4 year period of hire - if you renew your vehicles every 2 or 3 years, consider extending this by 12 months to save costs.
If your stated replacement cycle is 3 or 4 years, but in practice you allow higher mileage drivers to replace vehicles before the end of the contracted term - if they reach a mileage threshold first, then this can lead to unnecessary depreciation costs. These costs can be avoided by ensuring that vehicles are driven to the end of the contract period, wherever possible, and mileage parameters are set at the outset based on mileage projections on a case by case basis.
Another key area of cost saving is the level at which cash allowances are set.
This may be driven by a percentage of average pay per employee grade, without regard to the cost to your business of an equivalent company car - sometimes this can result in the level of cash allowance being set too generously.
A sensible approach to take is to ensure that the cash allowance level is set so that it is cost neutral for your business - i.e. whether the employee takes a company car or cash allowance, the whole life cost to the business (allowing for any variation in fuel reimbursement rates) is the same.
You should also consider incentives to encourage your employees to trade down wherever possible to a vehicle with lower CO2 and fuel consumption - perhaps offering a partial cash payment of the whole life cost difference between the benchmark vehicle and the chosen vehicle can be beneficial for both employee and employer. It is important that this is properly communicated, so that employees are aware of this option.
