Having survived two recessions and read about many more, writes David Rawlings of www.businesscarfinanceltd.co.uk, I know that this industry is one of the most cyclical. Typically we all become depressive as sales slow and costs increase, then we toast our amazing foresight when residual values improve and interest rates fall.

So instead of ignoring or joining in with the doom mongers use the current financial situation to your advantage and enjoy the benefits of good fleet management.

Introduce a low emission policy
As a simple rule of thumb the lower the emissions of a car the lower its whole life cost will be so, if ever introducing a low emission fleet policy made sense it has to be now. From an HR perspective employees who may have fled from a greener vehicle a year ago may see the light today when living costs are rising. Even if they don’t, the opportunity to easily switch employers is reduced in the current climate.

Consider extending or re writing contracts
When residual values are falling and interest rates uncertain, lease rates will almost certainly go up so it can make sense to avoid taking out new contracts at this time and simply extend the existing ones. Many lease providers are now willing to accept this practice as it avoids a distressed sale on their bottom line. Then when the economy is stable, lease rates settled and used values improved, new contracts will be more realistically priced and you’re not locked into recession based pricing.

Check the competitiveness of your funder
All lease providers borrow funds, take risks and have demanding shareholders. When the economy is tough the shareholders attitude towards risk and reward alters dramatically and larger than average rental differences are seen. If your lease provider is finding borrowing tough and suffering from residual losses you may find his pricing becomes substantially less attractive than an alternative provider.

Don’t focus on lease rentals or list price
Whole life cost has never been so important. As manufacturers start to see sales falling, some great deals will begin to appear. After a few months that great deal can look totally different when the tax effect is felt, increased running costs become apparent, and the driver’s tax bill hits home.

Review funding methods
Running a good business requires serious management of capital. When an economy is buoyant and its sell, sell, sell, it usually makes good financial sense to invest as much capital as possible in core activities. When an economy is stagnant companies are faced with a whole array of new issues. Unfortunately car contracts usually run for years not months and decisions taken today will have long term consequences. The only sensible solution is some serious financial modelling with lots of sensitivity analysis. Luckily most services providers can arrange this, although be very certain that their advice is truly independent.

Review your cash allowance policy
It’s hard to believe how many business cars are now privately owned. Most cash allowances were calculated when times weren’t tough, and drivers often saw flexibility as being more important than a more rigid company car policy. Today household incomes are stretched and loan defaults rising. How many drivers will have cars re possessed or ignore important servicing and maintenance schedules? It will be bad enough coping with a car-less salesman but a dangerous car has dire consequences for all involved.

Speak with manufacturers
Over the next few weekends most car dealerships will look like a ghost town from the Wild West. Unfortunately for the manufacturers and dealers cars are still being built, resulting in massive oversupply. Manufacturers who would have laughed at some fleet deals a year ago may soon be beating a path to your door. Now is the time to negotiate.

Put more cars on your fleet (salary sacrifice)
No, this isn’t madness it’s using tax to its best effect. Low emission cars and big fleet discounts equal great savings. By introducing an expanded company car scheme for all employees with the employer’s cost covered by the driver a real win win position can be achieved as employees who pay tax at 40% on income could then pay as little as 10% benefit-in-kind. A few forward thinking leasing companies even have systems that take all administration away from the company.

Monitor mileage
There will always be a place for face-to-face meetings to ensure a successful start to a business relationship, but how many sticking a face round the door calls can be avoided. The phrase “is your journey really necessary?” should be asked on a regular basis until sensible use of time and travel becomes second nature.

Buy your remaining drivers out of free fuel.
Over the last 8 years I have had many companies flatly refuse to consider removing free fuel, even when faced with six figure savings. This madness must stop now. It’s simple economics. If the cost of the employee’s tax is equal to the cost of the fuel you and the employee together are paying twice. If the cost of the tax is half the cost of the fuel together you’re worse off. The solutions, sit down, do the sums, share the savings, save some money.

Author David Rawlings is Director of Business Car Finance Ltd. For more advice go to
www.businesscarfinanceltd.co.uk