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How to Start Reducing Fleet Costs Ahead of the Brexit Transition End

How to Start Reducing Fleet Costs Ahead of the Brexit Transition End
The Siliconreview
13 Febuary, 2020

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.

Reduce the Size of the Fleet

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.

Reduce Fuel Expenditure

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:

  1. Telematics: Trailer tracking telematics devices can be obtained from FleetGo. These devices are used to not only track the routes of your fleet vehicles, but other factors such as driving style, mileage, and fuel consumption - providing your business with valuable data that can be used to make adjustments to help reduce fuel costs. FleetGo provides telematics devices which can be used to:
  • Track mileage claims accurately
  • Gain a better understanding of where improved driver training is needed to reduce aggressive driving styles
  • Improve routes to find options that use less fuel
  1. Fuel cards: When drivers are tasked with purchasing their own fuel on a job, there’s no guarantee that they’re going to stop off at the cheapest filling station to get it. Chances are, they are just going to fill up at the nearest station available to them. Some companies have found it useful to introduce fuel cards that are only available for use at cheaper fuel station brands, such as supermarket filling stations.
  2. Improving overall fleet fuel efficiency: Upgrading fleet vehicles to more fuel-efficient models where possible is a strategic move taken by many fleet managers hoping to reduce overall operations costs after Brexit. Electric and hybrid cars are both ideal options; not only will this reduce fuel consumption dramatically, or eliminate it completely, but it can also have a positive impact on your fleet’s carbon footprint.

Encourage Fuel Efficient Driving

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.

  1. Better gear use: Engine revs should be kept low when accelerating and drivers should change gears as early as possible.
  2. Slower speeds: The faster a vehicle is driven, the higher the pollution and fuel consumption.
  3. Optimal tyre pressure: Tyres that are running at the wrong pressure are not only a safety concern, but also wear much faster and put more strain on the engine. They can increase fuel consumption to a degree that might shock you. AutoTrader reported that driving with under-inflated tyres can reduce fuel economy by up to 10%. Ensure that tyre pressure is regularly checked, and always checked before any long journeys.
  4. Cut down on air-con: Air conditioning may be necessary for long drives in hot weather, but bear in mind that at slow speeds, it can increase fuel consumption. For drivers making short journeys in urban areas, opening the windows instead can have an effect on fuel spend.
  5. Switch off in traffic: Research presented by Fleet News found that if a vehicle is stationary for more than 20 seconds, you’ll see a small fuel saving from switching your engine off. In traffic jams where it’s likely the vehicle will be stopped for over two minutes, the RAC recommends switching off the engine.

Reconsider Funding Methods

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:

  • Employee vehicle ownership schemes
  • Used vehicle dealerships

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.

Choose Vehicles Based on Whole-Life Costs

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:

  1. Overall fleet costs
  2. Taxation
  3. Maintenance
  4. Insurance
  5. Fuel costs

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.