Fleet management can sometimes be perceived as a cost centre that is relegated to the background. However, it plays a key role in the company and can influence the profits and the general functioning of all the other departments. Good fleet management is therefore essential.
ERP & Finance Management & Fleet management
18 Jul 2018
Build your fleet
Everything starts with the purchase or lease of vehicles to create your fleet. The decision involves several variables but don’t panic, we will guide you!
Adapt your fleet to your needs
First of all, you need to choose the right financing method for your needs. There are 5 main types of vehicle financing: short-term leasing, medium-term leasing, long-term leasing, leasing with an option to buy, and simply buying. Your choice of financing will be conditioned by your company’s available cash flow.
Then there is the question of what type of vehicles to choose. The range of vehicles is wide and they are conditioned differently according to national regulations. Basically, companies choose between 2 types of vehicles: passenger cars and light commercial vehicles (LCV). VAT on LCVs is recoverable on the purchase or lease payments, and also on maintenance and repairs, which is not necessarily the case for passenger cars.
Allocate your vehicles wisely
The Car Policy (also known as the Automobile Charter) defines the rules for the use and allocation of company vehicles. Each vehicle is also linked to specific suppliers. It allows us to offer employees a catalogue of pre-selected vehicles that correspond to their rights and needs. At the same time, it simplifies the process of ordering and renewing vehicles, as it provides quick access to the relevant suppliers. This results in good purchasing synergies. A relevant Car Policy, therefore, allows for a good TCO (total cost of ownership).
When you sign up for a leasing agreement, the lease payments are determined according to mileage limits, which themselves are based on the average monthly mileage that the vehicle is expected to cover and the value of the vehicle. Average mileage is only a prediction, and as such it can vary significantly, in turn affecting both mileage limits and lease amounts. In this situation, it is necessary to readjust these amounts through riders. Amending a lease contract is not automatic, so you must monitor your mileage limits and request amendments from your lessors.
You can ask the lessor for flow charts (rate matrix) specifying the rent amounts to which they are committed. You can also use a car fleet management software to get a reliable follow-up on the mileage of your cars such as telematics boxes or fleet management and analysis tools to forecast the mileage consumption curve of your vehicles and better predict mileage limits.
Manage your fleet
You have chosen your vehicles and they are finally on the road. But it’s not over yet! As with any object of this magnitude, it is essential to take care of it and anticipate problems.
Maintain your vehicles
Technical inspection, oil change, revision, technical maintenance, so many terms easy to confuse… A technical inspection is mandatory to ensure that your vehicles are in good working order. Not performing technical inspections is considered an offense. The manufacturer’s maintenance, although not mandatory, is strongly recommended to ensure the proper functioning of the engine of your vehicles, their longevity, and to avoid losing the manufacturer’s warranty. Maintenance is outlined in a maintenance plan provided by the manufacturer. This is carried out every one or two years or every 15,000 km for gasoline cars and up to 20,000 km for diesel.
With respect to vehicle maintenance, we often focus on the engine and brakes, but tires are not to be neglected. You should regularly check the condition of your tires and maintain optimum pressure. If they are over-inflated, there is a risk of loss of grip and reduced mileage. If they are under-inflated, braking efficiency is reduced while fuel consumption and the risk of tire blowouts increase. Depending on the roads your employees drive on and the weather, consider rotating summer and winter tires.
Manage your claims
Insuring your vehicles is mandatory, whether you drive them or not. In 2018, fleet vehicles represent 7.2% of insured vehicles. Dedicated contracts (fleet insurance contract) allow you to avoid the rebate/surcharge coefficient (known as malus/bonus), or deductibles to pay depending on your negotiation. The employee and company’s liabilities are lessened. Fleet insurance also allows you to simplify your insurance contract management, as it insures all your vehicles in a single contract.
Because you are never safe from an accident and insurance does not prevent it, as a fleet manager, you must manage the claims related to your vehicles. This is the time to make use of the insurance that you had previously contracted. Contact and declare your claim to your insurer or broker to start the compensation of the damages suffered, and get a new vehicle if possible. At the same time, you can also manage the fines of your employees.
Control your fleet costs
Operational management is not the only aspect of a fleet manager’s work. He or she must also analyze the state of the fleet and its impact on the company. The most important and complex task is to calculate the overall cost of the fleet.
TCO (Total cost of ownership)
The TCO, total cost of ownership, is the total amount spent by the user of an asset during its life cycle. It covers direct and indirect costs.
The TCO of a vehicle fleet takes into account management costs, the purchase and/or rental of vehicles, vehicle maintenance, fiscal taxes, equipment, accidents, fuel, parking, tolls, telematics, and many others. Each company takes into consideration different elements in the calculation of their TCO.
The TCO calculation, sure, but for what purpose, you may ask? Calculating the TCO of your fleet will essentially allow you to target the areas of unnecessary costs and optimize them, and gain insights into your fleet’s evolution. All of which serve to improve your fleet.
Reduce your TCO: relevant software and indicators
To calculate the TCO correctly, you can use solutions that collect specific data, including mileage tracking of your vehicles. You can collect all this data by installing telematics boxes in your vehicles to study your drivers’ behaviour and the mileage feedback. You can also use your employees’ smartphones to carry out mileage surveys and thus monitor the mileage consumption of your fleet. A small reminder that, while the TCO is good, calculating the TCM is even better!
Collecting data is a good thing. However, you need to analyze it to derive relevant information. You can do this with a fleet management and analysis software. Analysis and reporting methods are simplified at once when they are integrated into one interface.