People can be surprisingly animated about the length and mileage of a company car contract. It sounds like the driest of all subject matters – and to those without a foot in the fleet camp, it probably is – but specialists will readily enthuse about the science of getting it just right, and how doing so can save an absolute packet.
The overriding message from fleet management sages – and this is not the first time we have reported this – is that traditional three-year/60,000-mile leases are pretty rare things these days. Conventional terms have generally stretched to four years, due to a combination of the EV movement (tax-wise, there is nothing to be gained by changing vehicles), yesteryear’s supply shortages and associated extensions – which arguably normalised longer terms – and the need to run vehicles for longer because they cost more than they used to.
“The average car lease for corporate orders that we placed in 2019 was over 22,000 miles for cars,” says Ben Edwards, consultant at leasing giant Arval, “but as we looked at last year’s corporate order bank, cars had actually dropped down to just shy of 19,000 miles… [and] moved out to an average of 45 months from 43.”
The mileage point is cogent. As much as the industry is geared to package contracts in convenient periods of time, there is an increasing focus on actual usage in place of round numbers.
“I would argue length is probably less important than mileage, because that’s really where the wear and tear is,” says Rory Mackinnon, commercial director at Holman, “if you have nice new car for three years and go into the shops every now and then, that’s not the same as doing 120,000 miles.”
David Bushnell, of Fleet Operations, points to a clear mileage split between job-need drivers and those with a car allowance for whom a day or two at home is now the norm.
“It’s hybrid working,” says the director of consultancy and strategy, “the mileage profile for those drivers has come down significantly from 20/25,000 to sub-20. The majority [of fleets] are still running 48 months… and the [used] market is still liking a four-year-old car. However, if you’ve got [a used car] at four years 60,000, rather than at four years 80,000, then it will do well.”
He adds that job-need drivers are still racking up the miles, but even then, there are opportunities to nip and tuck contracts for the better.
“Business-need drivers that have been on four years/100,000 miles: you can probably get them down to 80,000,” he explains, “25,000 miles down to 20,000 is sort of typical now… so fleets will often benchmark at 48 months/80,000 and then take the savings or recontract after six months or a year.”
There are always high-mileage drivers that exceed all of the above, but assuming they are relatively few, it is possible to minimise or eradicate excess mileage charges with pooling. If, say, one driver has covered well over the odds, but the rest finish their contracts below the agreed limit, the fleet can use whatever the majority has not covered as a credit against the high-miler’s overshot.
“You’re always going to get fleets with drivers that do significantly more mileage,” says Edwards, “but you’re going to get drivers doing significantly less, so you can recontract those in-life so that you are maintaining [consistency of] your payments.”
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Four-year contracts with trimmed mileage may be the norm for cars, but LCV terms are leggier. Holman typically starts them at 48 months and says many fleets go for 60 and some for 72 – and it’s similar elsewhere.
Figures from SMR specialist Epyx tracking the average age of fleet vehicles when they undergo a service or maintenance job show near-consistent ageing between May 2020 and May 2024. However, the average age of cars actually reduced from 33 to 32 months in the year to May 2024. Vans, however, kept on rising to 40 months, which proves that those in service are just getting older. Edwards says the average LCV contract on Arval’s fleet has grown to 57 months from 49 in 2019, while average mileage fell from 25,000 to 18,000 over the same period.
“You can run vans for longer; they’re capable of it” he explains, “they’re coming back at, like, 50,000 miles and they could run for another two years on top of that, perfectly fine, all within warranty.
“Fleets have also realised that, when they’re on a three-year replacement cycle, they also have to pay for the ply lining and all the vinyl wrapping every three years.”
A fluid situation
SMR plays a bigger role as vehicles age. Anecdotally, well-maintained four-year-old electric cars are said to be relatively safe bets, especially if the manufacturer offers more than the basic three-year/60,000-mile warranty (batteries are usually covered for seven or eight years and 100,000 miles under a separate warranty). They may have more moving parts, but really, equivalent ICE cars should not be headaches if they have been looked after.
That last part is a clincher, especially with vans, which are almost guaranteed a harder life. As Venson Automotive Solutions MD, Samantha Roff, explains, proactive maintenance is a must with long-term working vehicles.
“We’ve always said to think about it as kind of ‘HGV down’ rather than ‘car up’, especially for light commercial vehicles,” she explains, “they should be looked after in a way that’s more aligned with a truck than with a car, because these vehicles are being used every single day and they’re often loaded to the maximum.
“It just makes good business sense to have a preventative maintenance cycle. It might cost you a bit more to do it, but I think it would save you much, much more in the long term.”
Again in the interests of longevity, Roff advises fleets to pay particular attention to engine oil – both the regularity of top-ups and, more importantly, the type. While it is not an EV thing, it applies to anyone with an ICE car and to almost all LCV operators.
“What we have noticed is that education is needed around drivers and oil – and this is in cars and commercials. Because of the drive downward in emissions, the engines are becoming more and more finely tuned. Years ago, I think there was much more tolerance in a vehicle if you didn’t put quite the right oil in it, but that isn’t so much the case now. We’re having to work harder to impress upon drivers the need to follow very much more closely [manufacturers’] instructions, and we encourage some of our customers, if they are in depots, to have the right oil.
“That’s causing many issues… [and] very relevant now, because the manufacturers are managing goodwill contributions and warranties very, very tightly.”
The bottom line
If there is a lesson here, it is that a contract should be governed by a vehicle’s usage, rather than a round number. That and, assuming it is the right car or van for the job and the fleet is well managed, a longer term is nothing to be afraid of, and could well lead to a saving.
“If you want to try and reinvigorate your choice list, move from three years to four [with cars] then, if you can, drop the mileage,” says Edwards, “you’re absorbing your costs as a fleet manager, and you’re not then having to go to finance and say, ‘I need to put the allowances up’. You’re using the same allowance, you’ve just changed your parameters.
“We’ve just worked with a van fleet has got potential savings of nearly half a million pounds by moving from 36 months/60,000 miles to 48 months/80,000 – purely extending them for a year.”
The counter argument, at least with perk drivers, is that someone used to having a new company car every three years may well dig in their heels, even after the post-pandemic dearth of new cars. There are ways to mitigate against it, though.
“You always get those,” adds Edwards, “‘I’ve had a BMW 3 Series every three years and I’ve always gone for the black one,’ and then they change the colour slightly… you get people that are stuck in their ways. But I think what’s happening now, certainly over the past couple of years, is that people have realised how much [ICE] vehicles are costing them [in tax].
“We ran a campaign called ‘Nudge’ a little while ago, and the idea behind that was getting fleets that run a fixed manufacturer – a restricted listing – to open up their choice lists to the new manufacturers coming in. The BYDs – even MGs – and some of the others that have been around come back, like Smart. They used to be a tiny little car and had previously been excluded from fleet listings because they weren’t suitable, but now they’ve got the new #1 and #3.
“It is about trying to challenge fleets to open up those choices, because drivers will choose them.”
