How to Contain Company Car Fleet Cost During Coronavirus Crisis

14 Apr How to Contain Company Car Fleet Cost During Coronavirus Crisis

The Coronavirus is a global public health crisis that is challenging the resilience of companies across UK, Europe and beyond. It is forcing many businesses to change the way they operate, look for new ways to engage with their customers and consider their cost-containment options.

Whilst the majority of company car fleet’s may well be grounded as Europe continues in lockdown, now may be an appropriate time to negotiate with your fleet lessor to contain company car fleet cost and help the mid-term business continuation prospects for both parties.

Contract Extensions

Indications from the supplier network is that there is a willingness to support contract modifications that may be necessary to keep your drivers in their existing cars, despite vehicle contracts reaching maturity.  The following challenges to the fleet sector of

1. manufacturers ceasing production of new cars for at least 8 weeks,
2. the dealer network being unable to demonstrate and deliver new cars, and
3. the sale of used cars through auction having ceased during lockdown,

means that suppliers have to be very pragmatic in their approach. Given the reduced mileages that will be inevitable, this may be an ideal opportunity to extend and reduce lease costs rather than replace vehicles.

Fleetworx has engaged with many suppliers within the supply chain on this subject and clearly there is an appetite both to support their customers, but also to mitigate any potential losses that they may incur as a result of the prevailing economic conditions. Some lessors have kicked the can firmly down the road, offering long-term contract extensions for all. This will provide an element of security for both parties – security of ongoing contracts for the client and security of an ongoing revenue stream for the lease company.

What suits the client will depend on where they are in their replacement cycles, but for the same reason that ‘informal extensions’ rarely work in the client’s interest for anything but a short period, the solutions on offer may not always be as cost effective as they are practical. Fleetworx would always advise a more detailed assessment of your specific dynamics before using any ‘blunt instruments’ to solve practical uncertainties; there will be lots of solutions to keep you mobile in just a few weeks from now – keep your nerve, enlist some help if necessary and remember, Covid-19 will most likely have a significant financial impact on your business – best not add ‘excessive fleet costs’ to the list!

To discuss how to contain the cost of your company car fleet during the Coronavirus crisis then contact Graham Rees on +44(0) 1926 353 300