Traditional tendering is outdated, says Fleet Alliance
19 March 2010
Traditional tendering methods to find the best quotes for new vehicles are cumbersome and outdated, while modern competitive tendering in real time with real prices is the most cost effective way for businesses to source new cars, believes Fleet Alliance managing director Martin Brown.
When a business goes out to the market to obtain new vehicle quotes, and often at the same time find a new supplier, the traditional tendering methods most commonly used invite a number of leasing suppliers to submit a range of benchmark prices, usually with a pre-determined series of mileage parameters.
It’s a system that has been in use for many years, and often ends up with one supplier being retained although, more often than not, the one which has submitted a range of very attractive, initially low prices simply to win the business.
However, the process is fundamentally flawed. It is very long-winded and can often take months to complete, by which time many variables, such as manufacturer list prices, interest rates and residual values forecasts, may have changed.
Often these changes in market conditions are so profound that they render the initial quotes as virtually meaningless as, since they were first made, the goalposts have moved – often to a new pitch entirely!
“The traditional tendering method which many businesses still use invites leasing suppliers to provide benchmark prices for a range of vehicles and mileages.
“But it is too time consuming, takes too long to complete and often provides a set of answers that the fleet customer doesn’t really want, as it is based on historical prices that may no longer actually exist,” says Martin Brown.
“This type of process can also leave a door open for artificially low prices at the start of a contract to be incrementally increased over time. Rental creep of this nature is not unknown and can happen where only one supplier is in place, usually ending up costing the fleet customer far more than they had originally estimated,” he said.
The answer to this problem lies with modern competitive tendering which compares real time prices from a panel of different suppliers and then selects the most competitive on behalf of the fleet customer. The process takes hours rather than months.
Used in this way and managed effectively, competitive tendering has been shown to drive down fleet funding costs by as much as 8-10%.
There are a number of other benefits, too. By having multiple sources for vehicles, rather than a single source of supply, businesses are not dependent upon one leasing company and not at risk from excessive price rises and fluctuations.
Competitive tendering also creates competition between leasing suppliers, as they realise that only the most cost effective quotes for the vehicles in question are going to secure the contract.
Some leasing companies may be more competitive on certain makes or models of vehicles, based on their experience or opinion of them, while others may have differing views and hence higher prices. By using competitive tendering, the end customer can make these diverging views work to their advantage by securing the most competitive prices for the vehicles in question.
Fleet Alliance works with a panel of six or seven different vehicle funders, to ensure that when a fleet client requires a new car or wants to replace an existing one, only the cheapest quote currently available on the market from its preferred suppliers is the one put forward.
And by carefully managing and overseeing the competitive tendering process on behalf of its fleet customers, Fleet Alliance is able to select the very best prices, based on what can often be daily price swings in the market.
Competitive tendering offers fleet customers the best of all worlds and removes the need for business managers to do all of the hard work themselves. This includes the benefits of a single point of contact for the fleet manager, plus the lower total fleet costs that competitive tendering undoubtedly generates.
“Modern competitive tendering is slick, measurable and auditable and is based on prices that are valid today, rather than yesterday,” added Martin Brown.
19 March 2010
Traditional tendering methods to find the best quotes for new vehicles are cumbersome and outdated, while modern competitive tendering in real time with real prices is the most cost effective way for businesses to source new cars, believes Fleet Alliance managing director Martin Brown.
When a business goes out to the market to obtain new vehicle quotes, and often at the same time find a new supplier, the traditional tendering methods most commonly used invite a number of leasing suppliers to submit a range of benchmark prices, usually with a pre-determined series of mileage parameters.
It’s a system that has been in use for many years, and often ends up with one supplier being retained although, more often than not, the one which has submitted a range of very attractive, initially low prices simply to win the business.
However, the process is fundamentally flawed. It is very long-winded and can often take months to complete, by which time many variables, such as manufacturer list prices, interest rates and residual values forecasts, may have changed.
Often these changes in market conditions are so profound that they render the initial quotes as virtually meaningless as, since they were first made, the goalposts have moved – often to a new pitch entirely!
“The traditional tendering method which many businesses still use invites leasing suppliers to provide benchmark prices for a range of vehicles and mileages.
“But it is too time consuming, takes too long to complete and often provides a set of answers that the fleet customer doesn’t really want, as it is based on historical prices that may no longer actually exist,” says Martin Brown.
“This type of process can also leave a door open for artificially low prices at the start of a contract to be incrementally increased over time. Rental creep of this nature is not unknown and can happen where only one supplier is in place, usually ending up costing the fleet customer far more than they had originally estimated,” he said.
The answer to this problem lies with modern competitive tendering which compares real time prices from a panel of different suppliers and then selects the most competitive on behalf of the fleet customer. The process takes hours rather than months.
Used in this way and managed effectively, competitive tendering has been shown to drive down fleet funding costs by as much as 8-10%.
There are a number of other benefits, too. By having multiple sources for vehicles, rather than a single source of supply, businesses are not dependent upon one leasing company and not at risk from excessive price rises and fluctuations.
Competitive tendering also creates competition between leasing suppliers, as they realise that only the most cost effective quotes for the vehicles in question are going to secure the contract.
Some leasing companies may be more competitive on certain makes or models of vehicles, based on their experience or opinion of them, while others may have differing views and hence higher prices. By using competitive tendering, the end customer can make these diverging views work to their advantage by securing the most competitive prices for the vehicles in question.
Fleet Alliance works with a panel of six or seven different vehicle funders, to ensure that when a fleet client requires a new car or wants to replace an existing one, only the cheapest quote currently available on the market from its preferred suppliers is the one put forward.
And by carefully managing and overseeing the competitive tendering process on behalf of its fleet customers, Fleet Alliance is able to select the very best prices, based on what can often be daily price swings in the market.
Competitive tendering offers fleet customers the best of all worlds and removes the need for business managers to do all of the hard work themselves. This includes the benefits of a single point of contact for the fleet manager, plus the lower total fleet costs that competitive tendering undoubtedly generates.
“Modern competitive tendering is slick, measurable and auditable and is based on prices that are valid today, rather than yesterday,” added Martin Brown.
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