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The benefits of switching your fleet to panel funding
Rather than rely on single-source funding for reducing fleet administration, there are significant benefits from choosing panel funding through a single supplier approach, which not only provides significant fleet cost savings, but the administrative efficiencies of a single-source fleet management company suggests Rob Wentworth-James, Corporate Sales Director at Fleet Alliance.
How does this really work in practice? I asked Rob to provide more detail on how panel funding would work for larger fleets.
How much does the Fleet Alliance panel funding approach actually save clients?
The short answer is it usually saves between 6% and 11% of fleet leasing costs. But let me explain how these savings are achieved in more detail.
The simple bit is taking a traditional broking model for lease rentals. The clever bit is the management wraparound of fleet administration and driver contact that provides the best of both worlds: it’s a case of access to all market rates for the best lease prices on the day, but the administration advantage of dealing with only one company.
The importance of a panel of funders is more critical now than it has ever been with the increasing fleet take-up of electrification policies. Although we deal with seven different funders, not all share the same attitudes towards the residual values of plug-ins, whether that’s the hybrid variety or the fully electric versions. It means the difference in rental variance between funders can be staggering.
However, the real strength of our approach is that competitive commercial tension is always there between our panel providers. This runs contrary to sole supply which can see ‘rental creep’ over time as what’s sometimes referred to as ‘margin massage’ comes into play. Last year, for example, we made an average 9.4% saving for fleets against their legacy sole supply arrangements. I would also add that the more vehicle choice there is in the policy, then the more competitive our panel funding becomes.
In general, for each fleet we choose a panel of a maximum of three to four funders, including the legacy funder – because we want to include the former leasing supplier wherever possible because this guarantees ongoing cooperation under the new arrangements. Things shouldn’t have to change too much for the legacy leasing company, just because the client has chosen an independent management specialist to manage and bring greater dynamism to the fleet.
So there’s constant access to market-leading rates, but we also have the wraparound of simplified administration with the supporting technology of our e-fleet and e-fleet mobile tech, to help our client in the management of the fleet and to provide assistance to drivers.
Our systems and processes provide significant savings in time spent on internal fleet management. For example, on a fleet of more than 200 vehicles, you would probably expect to see an internal administrator working full time on that fleet.
However, with our fleet management platform, e-Fleet combined with our driver app, e-Fleet Mobile, that requirement will likely reduce by 80%, freeing up the administrator’s time for other core activity within the client business. And that’s it, apart from the obvious need for a contract manager to ensure we are performing correctly, bringing proactivity and creativity in how the fleet is managed.
I should also mention that we often also bring in specialist subcontractors where required – such as accident management or fuel cards – and these are all dedicated to reducing fleet costs through additional efficiency and improving vehicle uptime.
Can you give an example of quantifiable savings?
Yes, of course. If we began to manage a fleet of some 200 vehicles we would expect to save £72k a year – on the assumption that renewals are evenly spaced each year. Who wouldn’t want that?
Surely, a single supplier gives you a better service?
Well, by that do you mean a single contract hire company? If so, does it really give you a better service? But if you mean a single management company, I’d say that was different. We offer the single-source management of leasing companies, rather than one leasing company having to manage a rival contract hire company as the legacy contracts dial out. We make sure there are no conflicts. And here’s the really important part: as a client, you don’t have to wait four years to get all your fleet under one management umbrella.
The other benefits I would suggest are these: drivers aren’t disadvantaged from a disinterested legacy supplier because we are managing the supplier; and stakeholders have visibility over their entire fleet on one platform – which we call e-Fleet – rather than two systems (the legacy system and the new system).
I should also mention that our app and IT systems are under constant development and investment thanks to a team of in-house developers. I’m particularly excited about some of the new app features being developed for later this year which will ensure that we remain ahead of the curve.
Are there any downsides that clients need to be aware of?
Not really. While the management is more intensive by us, that’s an issue for us and not for our client. There will probably be a slight increase in the number of invoices than has been seen before, and with the pooling of mileage we have to be more on our guard to ensure that our client fully benefits from the overs and unders that take place on mileage, but pooling unless managed effectively can be a ‘sloppier’ way to approach fleet management. We regularly and proactively manage re-contracts to reflect real mileage over or under-runs to make sure our clients benefit. That’s the only possible downside I can see. Otherwise, everything is in one place. What’s not to like?
What about the administration – with all those different companies funding vehicles, how do clients keep track of renewals and so on?
There is a lot of admin going on, that’s for sure! But that’s what we’re being paid to manage. From a client perspective, they might have a few more invoices per month, but when you are saving £72,000 for a 200 fleet that’s probably worth it, particularly when we provide the finance tools to validate those additional invoices.
Is it difficult to move a fleet over to panel funding?
Well, you won’t be too surprised to learn that it’s very easy! We’ve long-established relationships with our panel funders, we set master agreements as part of the fleet implementation process and we can order vehicles as soon as credit lines open, even before we go live, and the legacy arrangements are fully under our management.
Getting those credit lines open early is a great time saver for clients and an early opportunity to take advantage of panel funding. Furthermore, it means the client is not at the mercy of the legacy supplier, who may be inclined to maximise value from the outgoing relationship during the implementation period.
Is now the right time, then, to ‘extract the value from your fleets’?
I think it’s critical, especially as cash flow and liquidity are so important to businesses at the moment.
For those companies that already lease through a single funder, now is the opportunity to make savings, reduce administration, gain greater proactive support and improved fleet visibility through our online tools and the support offered by our great fleet team. There is also the additional benefit of avoiding conflicts of interest over management of the legacy fleet since it’s all under the one roof of an independent management specialist.
For those companies that purchase their fleet vehicles, now might be the best time to release value from depreciating assets by way of a sale and leaseback, or just by moving to lease acquisition for the renewals.
We offer sophisticated online tools to help clients understand the magnitude of the potential savings from moving from cash to lease on a vehicle-by-vehicle basis. Our unique approach, from using a panel, drives the highest purchase price for the used vehicle and the lowest monthly rental for the newly contracted vehicle; it’s genuinely the best of both worlds.
So whichever approach your fleet takes for the future, now is the moment to ‘cash in’ and take advantage of those savings that can be yours, improve the financial status of your business, and benefit from improved fleet management. It’s a no-brainer!
Rob Wentworth-James is Corporate Sales Director at Fleet Alliance with over 30 years of experience in the leasing and fleet management industry. He’s a specialist in delivering strategic fleet management solutions with a specialism for innovative solutions that provide significant cost savings, and process enhancements for companies with 100+ vehicle fleets.
Ralph Morton is an award-winning journalist and Editorial Director at FleetandLeasing.com a website for the SME fleet sector dealing with the issues raised by leasing vehicles and the fleet management of vehicles.
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