With Brexit finalised on the 31st January and uncertainty in the coming months ahead for UK fleet businesses, reducing costs has never been more imperative than it is right now.
Brexit has already brought about price hikes in fuel, vehicles and vehicle parts and labour costs - and when the UK leaves the EU customs union at the end of the transition period expected in December 2020, there will be further taxation and tariff costs to contend with for fleet businesses driving in and out of the EU or importing parts from mainland Europe.
Chances are you’ve already started looking for new ways to offset these costs by implementing strategies to drive spending down in other areas of your fleet business.
Here are five specific ways to reduce fleet costs in the wake of Brexit and maintain your company’s profitability.
Reducing the number of vehicles in any given fleet is the most proven way to drive overall costs down. Eliminating one hundred vehicles has a savings potential into the hundreds of thousands of pounds, but even if you can’t afford to lose that many, cutting your fleet down by just a couple of vehicles could help you save thousands annually to offset the expected additional costs of trading in the EU.
The reduced savings amount that you will benefit from will vary depending on the mileage and usage of any particular vehicle. It’s a good time to review your fleet size and determine whether you are able to make up for losing vehicles by maximising remaining ones.
Since the result of the 2016 Brexit referendum, the UK has seen a massive increase in fuel costs, largely due to the value of the pound dropping dramatically against the dollar directly after the result of the vote was revealed.
And with the pound dropping again thanks to uncertainty surrounding the future of Brexit after the 31st January, fuel prices are expected to fluctuate once again. Soaring costs are a real possibility.
For fleet managers, this is bad news - fuel is the second largest variable expense faced by fleet companies, second to depreciation. A proactive fuel management programme in place at all times is key to ensuring that your fleet business remains alert to any potential spikes and has strategies in place to keep fuel expenditure to a minimum.
Some strategies that fleet businesses are implementing in order to save money on fuel include:
While all the methods above are useful for reducing fuel costs, the one best strategy to put in place for all fleet drivers is to encourage fuel efficient driving. According to the Energy Savings Trust, you can achieve savings of up to 15% per year by simply encouraging drivers to improve their habits on the road.
When reviewing a fleet strategy, consideration of alternative available funding methods for vehicles is a fundamental starting point. Bear in mind that both external changes such as Brexit, along with any internal changes within your business operations may mean that funding decisions you reached a few years ago may not stand up to the same scrutiny at the present time.
There are various options when it comes to funding a fleet. Contract hire still remains the most popular within the UK, due to several operational and financial benefits. But in the wake of Brexit, fleet businesses are considering other funding options, including:
If you choose to stick with or switch to contract hire, a reputable provider will be able to negotiate manufacturer terms on your behalf, along with providing access to a panel of funders to ensure that you get the best value. Alternatively, if you own some of your fleet vehicles outright, you may want to consider the option of selling them to a contract hire company and leasing them back.
Many fleet managers are still selecting vehicles based on purchasing price of P11D banding, but it’s important to bear in mind that this does not provide an accurate picture of the true cost of a vehicle across its lifetime on the fleet.
It’s crucial to review the total cost of ownership when selecting the optimum vehicles for the fleet. If you fund vehicles through contract hire, your provider should be able to provide you with access to financial modelling software that allows you to get a better idea of the cost of the following factors:
With the effects of Brexit coming into play in mere months, it’s never been more important for UK fleet businesses to start thinking about reducing overall operational costs.