Fixed costs and tight management controls for the EV years ahead

Company Focus

Companies operating vehicle fleets are locking down their costs and implementing stringent management controls as they prepare for the electric vehicle years ahead.

According to Lee Brown, head of 0Zone at The Grosvenor Group, contract hire is by far the most popular funding choice as customers seek fixed cost budgeting for the growth of electric vehicles and uncertain trading conditions.

“It’s very difficult to predict the future re-sale values of electric vehicles in three to four years’ time,” said Lee, “particularly when the economy is so unpredictable at the moment.

“As a result, with electric vehicle orders making up more than 55% of deliveries, we’re seeing  very strong demand for contract hire with companies not wishing to take the risk on things like depreciation and running costs of what is a relatively unknown quantity.

“It means businesses can operate a growing fleet of electric cars and vans with fixed cost  budgeting and no nasty surprises. 

“Another advantage of choosing contract hire for electric vehicles is that their purchase prices are currently higher than equivalent petrol or diesel models, yet despite their higher on road costs the monthly rentals are competitive.

“This is because we are anticipating that they will incur lower maintenance costs and will command relatively strong residual values – and that is the risk we are taking as a leasing business.”

A company that took the initiative to move to contract hire ahead of the switch to electric vehicles is Salvation Army Trading Company. They help fund The Salvation Army’s vital work by raising money and encouraging reuse and recycling through a network of over 200 charity shops and a clothing collection division.

They were looking to future-proof their fleet with improved efficiencies, better budgeting and professional fleet management and their decision to sell their owned fleet to Grosvenor as part of a sale and leaseback was all part of a strategy to move to greener vehicles.

Chris Bentley, the Salvation Army Trading Company’s fleet manager explained, “Grosvenor Leasing quickly valued our vehicles based on their age and mileage as well as providing us with contract hire rentals to lease each vehicle back to us.

“This gave us a cash injection, which is always beneficial in supporting the important work we do, but more importantly it improved our overall fleet funding and management solution in one transaction.

“With no disruption to our drivers we began benefiting from fixed monthly costs, a removal of risk, less administration and access to a range of additional fleet management solutions.

“One aspect of this was Grosvenor’s fleet management and maintenance management support, which brought a whole new level of expertise to our overall fleet operation.”

Weetabix is another well-known brand to move to contract hire with Grosvenor Leasing through a sale and leaseback and are also now driving towards a zero emission fleet thanks to their ultra low emission vehicle policy.

Through the sale and leaseback, the Weetabix fleet converted to a fully maintained contract hire agreement, offering Weetabix a wide range of benefits including improved cash flow, better budgeting and a comprehensive outsourced fleet management solution.

Drivers were immediately able to access a wide range of services and support, from servicing, maintenance and repairs through to accident management, daily rental, fast-fit items and European travel – all monitored, measured and reported on thanks to OSCAR365; Grosvenor’s market-leading, and award-winning online fleet management system.

By 2020, Weetabix was looking at ways of improving its vehicle policy to offer drivers better choice and move towards ultra-low emission and electric vehicles. Keen that all changes were fully communicated, Weetabix asked Grosvenor to run a video conference workshop with 50 Weetabix drivers during the COVID-19 lockdown. This resulted in the new policy being successfully launched based on whole life costs, improved choice and lower emissions.

“For companies that own their vehicles, now is a good time to consider moving to contract hire for their electric vehicle orders,” said Lee.

“However, if ownership remains your preferred acquisition and funding method, the Grosvenor Group’s specialist fleet management business, Interactive Fleet Management, is an ideal solution to manage that transition to alternative fuels for you and the associated costs.

“Within The Grosvenor Group, we can also offer market leading personal contract hire and salary sacrifice solutions, both of which can also support a move to greener vehicles.

“All of this is supported by our 0Zone team, who specialise in supporting companies with the smooth transition to EVs.

“The 0Zone team looks at the environmental, operational and financial impact of moving to ULEVs and EVs, and companies looking to go green benefit from an assessment of their environmental impact with a clear pathway to convert their fleet, over time, towards ultra-low emission and electric vehicles.”

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