Commercial vans: a buyer’s guide
What to look for when purchasing a van
There’s a well-known phrase that ‘if you bought it, a lorry brought it’, but that only tells half the story, as vans play an equally vital role in keeping British business moving.
While lorries are able to carry bulk goods between destinations, it is vans that offer the pinpoint delivery mechanism for all kinds of business, from goods to services. So if lorries act as the syringe, focused on carrying and movement, then they are pretty useless without vans being the needle to provide accurate delivery wherever businesses need to operate.
Although vans have been dismissed off-hand because of their drivers’ reputations, in recent years the role of professional management in keeping costs low has been recognised.
Vans have also changed significantly, as technology more common to cars is being fitted as standard to modern light commercial vehicles (LCVs), particularly safety devices. Many more vans now feature a driver’s airbag as a standard feature, along with anti-lock brakes, and there is more to come.
The old Mercedes-Benz Sprinter led the way by fitting its Electronic Stability Program as standard. When a driver makes an emergency manoeuvre, the system can sense when the vehicle is about to skid out of control and brake individual wheels to avoid an accident.
The latest model, launched in May, offers Adaptive ESP, which takes into account the load being carried in the back of the van and adjusts braking accordingly. Clever stuff.
Fleets also need to consider the type of vans they need to drive. Many now introduce the biggest vehicle they can get without having to introduce a tachograph, meaning growth in the sub-3.5 tonne market. This has been particularly driven by rocketing demand for home shopping from supermarkets and internet ordering services from suppliers.
In 2005, total new CV registrations, including buses and coaches, stood at 385,969 units, up 39.5% over the last five years, according to figures from the Society of Motor Manufacturers and Traders.
Sub 3.5-tonne vehicles make up the majority of this market, accounting for 322,930 sales last year, an increase of 30% over 10 years ago.
Companies like yours need to be crystal clear on their requirements when specifying vehicles, as manufacturers have tens of thousands of permutations of their LCVs, from bodystyles to seats and racking. You can even specify sinks and loos.
Engine requirements are also important, as matching power to pulling requirements is vital for achieving good fuel economy. Also consider your company’s mileage, funding and replacement cycles. Incorrect specification can lead to an increased need to rent vans to meet unexpected requirements, which contributes to higher running costs. Lastly, don’t forget the drivers. As from next year the taxable benefit of allowing them significant private use rises from £500 to £3,000.
It can help to speak to the managers of other fleets and get their views or use organisations such as Acfo, the fleet operators’ association (www.acfo.org). Finding detailed specifications for vans is relatively easy as there are a number of websites to help, including www.whatvan.co.uk and www.fleetdirectory.co.uk.
Leasing a van vs buying a van
Buying is currently a favourite option for many UK fleets, but an increasing number of firms realise that there are significant benefits in leasing if the process is managed correctly.
Purchasing has been preferred for so long for a variety of factors, most importantly the assumption that vans will be practically worthless when they finish their time on the fleet because of their hard life.
So which funding option – leasing or purchase – is most cost-effective and which makes more sense? The answer is unique for each company, but key questions can help. Most importantly, can your company afford to have its money tied up in a vehicle through outright purchase when it could be used more effectively elsewhere in the business? And can you afford an in-house fleet manager controlling your purchased fleet?
With leasing, you pay regular instalments covering the cost of a specified mileage and timescale. The leasing company takes all the residual value risk and will even cover maintenance, too.
But the leasing company has made basic assumptions about the condition of the vehicle when it is returned, and the company will charge you if it fails to meet those standards. Horror stories include vans returned with missing windscreens or doors and even with one tonne of set concrete in the rear. There will also be charges for exceeding the contracted mileage.
Only venture into leasing if you can effectively man- age your drivers and avoid these unexpected costs. Typical contract hire rates over four years and 80,000 miles include a Renault Kangoo 1.5 dci SL17 for £213.06 per month plus VAT, or a Mercedes-Benz Sprinter 311 MWB for £413.25 per month plus VAT.
With vehicle tracking a growing market, van specialist leasing companies can provide your business with almost anything you want, as this can help cut costs; however, all of these will add to your monthly rates. Ask a fi nancial expert or the leasing company itself to provide an analysis of purchase versus leasing to help make a decision.
Costs of running a van
How much should your fleet of vans cost to run? It’s a difficult question, as the requirements of every business are so different, but there are benchmarking services that can help. For free access to the running costs of hundreds of vans, fleets can sign up to www.fleetvan.net and click on ‘running costs’, where they can specify any vehicle and receive details on how much it should cost to run.
As well as list price, engine performance, payload, measurements and load volume, it offers figures on depreciation, along with service maintenance and repair. For example, a Ford Transit Connect SWB Low Roof L TDCi 90ps costing £10,275 loses 8.75 pence per mile (ppm) over three years/90,000 miles and costs 2.12ppm in service, maintenance and repair – a total of 10.70ppm.
Fuel costs aren’t provided because they vary according to payload and driving style, but a range of vans tested by industry publications can be expected to achieve between 25 to 30 miles per gallon (mpg) in most real-world use. It is easy to work out that at 30mpg, the van would use 3,000 gallons over 90,000 miles, so at current prices – diesel is £4.50 a gallon – a fleet would be paying £13,500 in fuel costs, or 15ppm.
This shows that encouraging drivers to achieve good fuel economy can have a dramatic effect on business costs. Overall, over 90,000 miles, this would suggest a typical van would cost 25.7ppm, or £23,130, in whole-life costs, assuming it was treated well and achieved its expected residual value.
Clearly fleets can reduce the cost by negotiating on price, equipment and using ply-lining to protect the interior. Additionally they can opt for contract hire, where the buying power of the leasing company will have helped achieve some savings over list price already. When purchasing, fleets could join forces with other companies to form a buying group and reduce costs.
Although a company can outsource much of the administration for a van fleet, it still pays to have in-house expertise. The challenges a company will face that are specific to running a van fleet are numerous, from downtime issues to risk management and fuel costs.
If vans aren’t on the road they don’t earn money, but when they are driving, you must watch how they’re used so as to keep costs down. Anyone who travels on the motorway knows the fastest vehicles tend to be fully-laden vans, and this is a serious issue for companies.
If drivers are instructed to speed to meet appointments, what happens if there is an accident? Increasingly, companies are being investigated and must demonstrate their duty of care procedures. Driver training may seem difficult and costly, but it can all be paid for by avoiding one crash.
Protection from prosecution could be as simple as getting drivers to read and sign their handbook and agree to standards such as not using a hand-held mobile phone while driving. For most companies, reducing accidents will be the best way to have the biggest impact on their bottom line when hidden costs are taken into account, such as lost working time, lost contracts and added staff and vehicle costs.
In business, comprehensive insurance cover is vital and breakdown support should focus on meeting customer demands by forwarding goods, rather than simple vehicle repair or recovery.
Van branding considerations
Once you have bought or leased your van, how do you let customers know the vehicle is yours?
Branding is essential, as industry experts suggest that writing on the side of your vans is worth at least £60 a month in advertising. If the van is parked on a building site all day, then going to a lot of expense is pointless. But if it’s moving around town or on the motorway, an eye-catching look can pay dividends.
According to signs and decals specialist Signs Express, a van finished in an eye-catching design will register some 3,000-3,500 ‘impressions’ on pedestrians and other road users every hour. The question is ‘what graphics technique do you apply to your vehicles?’
Traditional painted signwriting is a thing of the past. It is creatively limited, takes a lot of time, requires no small amount of money and is problematic when it comes to disposal.
Many van fleets prefer a vinyl application. It’s cost-effective at about £100 to £200 per vehicle. However, it is largely limited to lettering and simple shapes in single colours. Vehicle wrapping – where your van is literally encased from bumper-to-bumper and sill-to-roof in film – can be pricey, with costs running into the thousands in some cases. However, it can turn your van into a genuine all-singing, all-dancing mobile billboard.
With the right solvents, removal is cheap, and remarketing specialists, such as Fleet Auction Group, charge reasonable rates. But never sell vehicles with the wrapping still on, as it damages residual values and lets fraudsters use your brand for criminal activity.
Running vans can be complicated and expensive if you get it wrong. The most important thing a company should do is get wide-ranging advice from experts and ensure there is internal expertise to monitor contracts and keep drivers in line. It is a worthwhile investment, as vans are essential to most businesses, and every penny saved by running the fleet properly goes straight onto your company’s bottom line.
John Maslen is editor in chief of Fleet Van and Fleet News Europe