The importance of Whole Life Costs for your fleet

Whole Life Cost
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All organisations are under pressure to save money in the current economic climate so it makes sound financial sense to operate the most cost-effective company cars and vans.

That means basing company car choice lists and vehicle selection on whole life costs or total cost of ownership figures.

Despite expert advice, many companies continue to use a number of other criteria to make their vehicle selection including vehicle list price, P11D value, a notional cash value or a headline monthly lease rate, which may not include all operating costs including tax.

In many businesses the fleet operation is often the second highest cost base in an organisation after labour so when the pressure is on across the organisation to save money it is vital that fleet decision-makers are confident that the most cost-effective vehicles are being operated.

The cheapest vehicles to operate are those with the lowest wholelife costs – not necessarily those with the lowest list price, P11D value or headline rental which, over a typical fleet replacement cycle of three years/60,000 miles or four years/80,000 miles, may prove more expensive to run.

Aled Williams, director of Days Fleet, said: “Wholelife costs represent the most effective way of operating and managing a fleet/allocation policy because they provides the best forward estimate of the real costs to the business, in delivering business mileage, over the period for which the vehicle will be retained.”

Whole life costs reflect all the projected, vehicle-specific costs associated with operating a vehicle over its fleet life on a per annum, per month or per mile basis.

If leasing vehicles, whole life cost data should reflect the vehicle rental, service, maintenance and repair costs, insurance, Vehicle Excise Duty, fuel (including VAT on the fuel scale charge for private use if allowed), employer Class 1A National Insurance, the lease rental disallowance and corporation tax savings.

For organisations that continue to outright purchase whole life cost data should include: depreciation (the total difference between the original cost and the residual value projected), funding, service, maintenance and repairs, VED, insurance, fuel, Class 1A NIC payments and capital allowance savings.

Mr Williams said: “As all vehicle-related taxes are linked to a model’s CO2 emissions it is imperative that fleet chiefs regularly review vehicle selection criteria and choice lists to ensure the most cost-efficient company cars and vans are being operated, while always ensuring they are fit-for-purpose.

“All motor manufacturers are continually introducing new and updated models as they find ever-more imaginative ways to reduce vehicle emissions. A saving of just 5g/km can trigger a significant whole life cost saving as a result of its impact on tax and residual values.”
Talk to Days Fleet for expert advice on whole life cost calculations and selecting the most cost-efficient vehicles for your fleet.

Phone: 0845 815 0019

Email: [email protected]