The flexible fleet car options your business could benefit from
Looking for flexible ways to source vans and cars, which don’t tie you to long contracts? Perhaps medium-term rental could be the answer
The problem with being an expanding business is that it can be very hard to plan exactly what size and shape the company will take in the next few years.
The same goes for your fleet of vehicles, whether they be cars or vans. While the business plan might suggest you need a certain number of vehicles, that strategy can sometimes go out of the window with a sudden contract win or the immediate need to employ people to fulfil a flood of work.
As a result, you might not want to be committing to high-cost deals for the longer-term supply of cars and vans. But there is another way, and it is becoming increasingly popular: medium term rental – otherwise known as short-term leasing or mini-leasing.
How medium-term rental works
Essentially, medium-term rental involves many of the same processes as daily rental and leasing. You pay a deposit, usually of around three months, although this can vary and the amount you pay has an effect on the subsequent monthly payments.
The monthly lease rate is generally slightly above that of a standard lease but well below that of daily rental (by up to 50%), and there are often still mileage parameters and wear and tear standards as part of the deal.
There is usually more flexibility on when you hand the vehicles back too, although you still need to keep an eye on this and speak to your supplier.
Vehicles are often supplied as new from a franchise dealer. Choice is more specific to make and model as well, rather than just getting any one of a number of vehicles in a specific segment or price band. It tends to be based on what is available instead of the full choice you’d get with leasing. Don’t forget though, if you are paying for the rental on these cars, they will be liable for BIK (benefit-in-kind) and NIC (National Insurance Contributions) charges.
Managing uncertainty in the market
There is another factor of medium-term rental that could prove useful to an small or medium-sized business like yours. The government has yet to announce how the new WLTP (World Harmonised Light Vehicles Test Procedure) fuel and emissions testing regime will be applied to benefit-in-kind company car tax from the 2020-21 tax year, and this is causing a dilemma among drivers and businesses.
Simply, business owners like you have no idea which vehicle to choose, because they have don’t know what the costs will be at that point. WLTP is based on ‘real world’ performance of cars and the tax bands will not be determined until all the testing has taken place by April 2020. In addition, there are some other issues at play in the decision-making mix at the moment, such as the potential ‘demonisation’ of diesel and Brexit.
Medium term rental could help solve those problem, helping drivers and their employers defer that big decision for a few months until announcements come and a more certain long-term decision can be made.
Giving yourself breathing space
You might be undergoing some form of internal organisational change – whether growing or contracting – and there are advantages in using medium term rental until your future is clearer.
It also may help to free up capital, by avoiding the commitment to large deposits on the purchase of vehicles.
Allowing flexibility with employees
If you go down the route of supplying company cars to your workforce, it can be a leap of faith to buy or lease them, especially if the funding is spread out over a number of years.
After all, if they leave or you need to change the basis for allocating company cars, you could be left paying for vehicles you don’t need, and while you can ‘defleet’ them, the cost of doing that can be expensive: either trying to sell bought vehicles on the fickle used market or handing back leased cars and incurring hefty early termination charges.
You take on employees, and some work out, and some don’t, and the nature of the business might change too, or you might have a very seasonally-dependent business model. Other instances where greater flexibility can work might be if you are recruiting someone and need a car for their probation period or if you are employing someone on a fixed-term contract.
Getting to understand fleet
If you are a growing business, you might be new to setting up a fleet, and the various issues that can arise. Sometimes, businesses choose entirely the wrong vehicles, ones that are not fit for purpose, are far too expensive to run, or unreliable, and then find themselves stuck with them and their costs for years.
Medium-term rental lets you understand all the issues of fleet management without the pressure of three of four years’ commitment to a particular choice.
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