KEEPING the lid on fleet costs is a continual process for the management of a fleet, whatever the size.
More so now, though, as companies look to keep cash flowing through the business in a COVID-19 disrupted economy.
Experienced fleet professional, Keith Allen, believes that fleets can access that holy grail by considering what he calls multi-bid fleet management.
Keith Allen:
“Relying on one provider puts you at risk of ‘rate creep’ along with exposure to their risk profile.”
Allen, who was formerly the MD of leasing company ALD Automotive, before becoming Managing Director of ARI Fleet, a fleet management company, has seen most forms of company car and van acquisition in his time.
But with leasing, he says, the best way to approach it is through a method called multi-bid funding.
Essentially you put a car lease out to tender through a panel of vehicle funders, and the most competitive on the day wins the business. He says:
It means that fleets always benefit from the best value, delivering significant cost savings.
Relying on one provider puts you at risk of ‘rate creep’ along with exposure to their risk profile. Both factors can severely impact business contract hire rental rates. By spreading your risk over a panel of funders, it eliminates these risk elements.
Using a fleet management provider that has the ability to deliver multi-bid acquisition, provides one point of contact but transparent pricing, reduced lifecycle costs and enhanced service levels.
Allen has put his extensive experience down into a White Paper, which has been published by CBVC Vehicle Management. The White Paper looks at the pros and cons of different fleet acquisition policies.
A Sole Supply Policy
While this might seem an elegantly simple solution for a business, with one master lease to administer and full access to the lease market, Allen warns that it could leave fleets exposed to short term pricing strategies and rate fluctuation following residual value reviews.
Multi-Supply Fleet Acquisition
The very opposite of sole supply, such an approach enables a fleet to competitively procure leasing quotations from more than one leasing company. However, Allen says that the business “is then faced with multiple contracts, invoices, and relationships to administer”. In other words it’s an admin heavy and time intensive approach.
Multi-Bid Fleet Acquisition
Multi-bid is very much like multi-supply, but the advantage here is that a fleet can competitively procure business contract hire quotations from a single fleet management company. But the difference here is that the fleet management company can access a panel of approved leasing companies. Among the advantages, according to Allen, are cost optimisation on each new vehicle order and greater consistency in the total cost of ownership. “Crucially, it provides a single point of contact, unlike the multi-supply method,” he says.
What Are The Savings?
Allen says the lease cost savings for a fleet can be substantial if a multi-bid leasing approach is taken.
“If you are running a fleet of – say 400 vehicles – then over a four-year term you could potentially be saving more than £380,000 based on a cost saving of £20 per month, per vehicle, by moving to a multi-bid approach to fleet procurement. The benefits to your company’s bottom line cannot be ignored. And nor should they.”
Read More About Fleet Acquisition Policies
Keith Allen’s White Paper is available to read from publisher’s CBVC Vehicle Management. You can access the White Paper via this link: Multi-Bid Funding: A White Paper by CBVC Vehicle Management.
JOIN THE DISCUSSION
Why not join the conversation on SME fleets – visit our LinkedIn SME Fleet Discussion page