Fleets have been advised to concentrate on value rather than price when it comes to vehicle procurement.
Speaking at the Fleet Industry Advisory Group’s inaugural workshop, covering procurement, Ian Hill, MD of Activa Contracts, told delegates in Wolverhampton that price is often the first point in procurement conversations, but should be one of the last.
He highlighted seven factors fleets should take into account when considering funding and procurement (see ‘Seven funding considerations’, right), but emphasised that one size doesn’t fit all.
He added that different solutions will apply depending on the individual situation of the business, and possibly a combination of solutions could be the best approach.
Hill claimed that contract hire was typically the lowest-cost solution for ‘normal’ businesses with mainstream corporate tax and VAT positions, were cashflow conscious, averse to risk, preferred off-balance sheet funding and had limited fleet management expertise.
However, he suggested the outright purchase of vehicles could be applicable for organisations that could not, or only partially, recover VAT, qualified for zero or minimal corporation tax relief, preferred assets to be on their balance sheet, employed internal/external fleet management expertise, were not averse to risk or were cash rich.
FIAG’s funding considerations
. The company’s corporation tax position
. The company’s VAT situation
. The organisation’s cash situation
. The employer’s rate of return on capital employed
. Corporate balance sheet implications
. The level of internal fleet expertise
. The culture of the business and its attitude to financial risk and outsourcing
