HR practitioners would like to know more about leasing vehicles, we discovered in a recent reader survey. So why opt for lease? Are there any pitfalls? And how do you pick the right lease manager for you? Read our quick guide to find out.
Leasing cars for your workforce could prove cheaper than buying them directly, as you are asking a large fleet manager to negotiate on your behalf. “Cars are hugely expensive, and as a small to medium-sized company, you will never get the prices a leasing company can get,” explains Robert Young, sales manager for the South East at Fleet Hire.
The lease option will also give you greater certainty on cashflow; an agreement typically accounts for all the costs associated with car ownership except for insurance and fuel. Depreciation, maintenance and repair costs are usually agreed in advance. The added bonus is you pay monthly rather than footing a big upfront bill, says Young. He points out that with Brexit on the horizon, steady, predictable cashflow will be more important than ever.
Leased cars are usually upgraded around every two to three years. Newer models typically have lower CO2 emissions. And the government has made it more tax-efficient to run green vehicles, saving employers and staff even more money.
Leasing can also boost retention. Far from seeing a lease as a downgrade, staff often enjoy receiving a new vehicle regularly and the wider choice leasing can open up. Samsung Electronics has recently introduced a new leasing scheme for its employees to capitalise on precisely this. “We are looking to enable our employees to make their own choices with regards to their benefits package,” explains Jo Bean, the company’s head of reward and benefits.
“This scheme gives us the ability to do that. We are able to quote on pretty much any vehicle, which gives employees the maximum amount of choice. Employees who don’t have a role that necessitates a car can lease one via a salary exchange scheme [otherwise known as salary sacrifice].”
Leasing will also help alleviate the pressure on busy HR teams. “Where traditionally company vehicles were provided, there would need to be an employee whose full-time job it was to look after those drivers. That’s where lease companies can now step in,” says Simon Carr, brand director at LeasePlan.
When leasing may be a dead end
A point to consider is what happens when staff leave the company, especially if mass redundancies are a possibility. “If a company has a very high staff turnover and can’t reallocate vehicles then it might be better to buy cars outright. But even then, if people left, they would need to sell the cars,” says Young.
How to get the best deal
It’s important to vet providers. Are they financially secure, and who owns them? A reputable leasing company will be a member of a recognised body, such as the British Vehicle Rental Leasing Association, says Young. He suggests HR practitioners could ask other companies in the same sector which leasing company they use. It’s also a great idea to visit the prospective partner to see its operations first-hand and meet its directors.
Establish the total amount you are paying to buy and maintain your cars, and then identify the cost savings that can be made, advises Carr. You could even ask that guaranteed cost savings are written into a contract.
If your company is international, it’s a good idea to consider unifying your fleet with an international provider. You could achieve savings on a global scale.
When Samsung Electronics tendered for a lease partner for its salary exchange scheme, it went to the whole of the market before selecting LeasePlan, says Bean: “The key questions for us were around price, ancillary services such as accident management servicing, licence checking, driver administration, and technology in respect of the ease of getting quotes for the salary exchange scheme. It’s important for the individual to have access to tools that will help them compare quotes and add the extras they want to. The more cars you put on there, the more choices employees have, so it’s very important for them to be able to access the information that they need.”
Bean and her team also liked the fact that LeasePlan’s SalaryPlan website links to the benefits technology that Samsung uses. The level of service employees would receive, whether they have had an accident or simply want to arrange a routine service, was another key consideration.
Carr adds that organisations should also consider: “What is the culture of your organisation? Are [staff] looking for a 24/7 concierge service where everything’s done for them, or something more basic?”
Bean also advises other HR decision-makers to think carefully about timeframe in order to ensure a smooth transition from the existing fleet to the new one. “Make sure you have enough time to launch it properly with employees,” she says.