In the second of a three-part series of articles on appraising your fleet, technical editor Dan Gilkes looks at fleet replacement.
For many companies, the days of simply replacing older vans with the latest version of the same model are long gone. Fleet managers and company owners have to justify every penny spent and fleet replacement offers plenty of opportunities to cut costs and increase efficiency. Whether you opt for purchase, lease or contract rental, the challenge of choosing the right vehicles for your operation is worth some serious consideration.
Getting the right van
Three or four years is a long time in the life of a business and the vans that might have been the perfect fit for your operation last time, may not offer the ideal solution this time around. New customers, varying mileages, different loads and of course rapidly changing environmental concerns will all have an influence on the decision-making process. Yet, the first question must remain the same: What do you need the van to do?
What will you be carrying? How heavy is it? How far will you be travelling? Do you need to transport people as well as goods or tools? Will your journeys involve low emission and clean air zones?
Downsizing, or what some now call right-sizing, has led many van users to opt for smaller vehicles, with potential savings in purchase and operating costs among the main benefits. If your L3H2 3.5-tonne vans spend 90% of their time running half empty, then might you be better off using smaller, more efficient models, with the option to hire in a larger vehicle when needed? Or could your occasional load concerns be better served by a trailer, to run with the smaller model? If your problem is payload rather than load volume, there are also plenty of mid-weight vans that can carry as much, or even more than some larger 3.5-tonne models.
Right-sizing should not be limited to the body either. Manufacturers offer a range of engine power ratings and it can be worth taking a closer look at the specification tables. For instance, PSA offers several of its Peugeot, Citroen and Vauxhall vans with the option of a 1.5-litre diesel and a 2.0-litre diesel, both delivering 120hp. However, the 2.0-litre models have a higher payload capability than the 1.5-litre vans, so opting for the smaller engine for economy reasons may not be the most efficient way forwards if weight is an important consideration.
Indeed, in some cases, the smallest engine with the lowest power output, may not be the most economical option at all. This is especially true if you are often running fully laden or taking on longer, more arduous, journeys, where the more powerful engine is not working as hard and will return reasonable fuel consumption. Likewise, the option of an automatic transmission need not result in far higher fuel bills these days. In fact, Iveco claims that the eight-speed automatic in its Daily Hy-Matic vans can prove as economical as a manual gearbox for some operators.
Of course, you may decide that now is the time to make the move to electric drive, particularly if your business is city-based. We’ll be covering battery electric, hybrid and alternative fuel vehicles in more detail next month.
Total cost of ownership
Light commercial vehicles are no longer the poor relatives of the car market, with back-to-basic trim levels very much a thing of the past. However, while options lists can now run to many pages, it is worth considering the real value before you tick those extra boxes. Specifying a van may not just be about keeping your drivers comfortable though, unless you are going to keep the vans for many years, it could be worth considering the appeal of certain items on the used market and how those options effect residual values.
Used van buyers are more likely to be the actual drivers of the vehicle, so they will welcome the addition of air-conditioning, parking sensors and other convenience items. Auction companies report that condition can impact the value of a used van too, so it is worth ensuring that drivers care for the vehicles while they are on your fleet.
Having decided on the specification, there is still a decision to be made about the best way to finance the
vehicle. Physically purchasing a van seems to be a much less popular option these days, as companies move away from loans or actually investing hard won cash, particularly in an uncertain business climate. However, buying the van does give your company an asset, that can be used at a later date as a down-payment on the next vehicle, or simply a way to raise cash if required.
Leasing or contract hire provides a known monthly cost, without a large upfront investment. At the end of the deal you can walk away, or take on a new agreement, or in the case of a lease purchase you can choose to pay a final sum to own the vehicle. But, you may have mileage limits and the condition of the van will be an important factor towards the end of the lease agreement.
The big benefit of a lease or contract hire deal is that you don’t have to worry about depreciation. If the market drops, that is the finance company’s concern, your payments remain the same. You aren’t necessarily tied into a three or four-year deal either, there are options to change the vehicle or terminate the agreement early if required.
Leasing also provides the option to include service and maintenance agreements, even tyre replacement and breakdown cover can be included in the monthly payment. If your vehicles have some form of conversion or bodybuilding work, that too can be part of the monthly cost, to spread the financial outlay.
Many companies might not consider it, but straight forward daily rental is also an option in some cases, particularly when downsizing a fleet.
If you only occasionally need that larger van or dropside, then why own it all year round? Simply rent the vehicle for a short term to top up the fleet and then hand it back when not required.