Lloyds TSB Autolease has called for businesses to go the extra mile

Lloyds TSB Autolease (LTSBA) has called for businesses to learn the lessons of the last recession and take immediate action to reduce the costs of mobilising their workforce, as new legislation hits on April 1st.

The vehicle leasing and funding subsidiary of the high street bank says that many firms are going the extra mile to stop the squeeze on fleet costs, but need to pass on the impact to employees through changes to car schemes.

With employee power on the wane as the recession bites, LTSBA points out that many of its customers have already decided to run their company vehicles for longer to reduce monthly payments by up to 10%, despite past concerns over employee dissatisfaction.

Mark Chessman, Deputy Managing Director of LTSBA, says: Failing to learn the lessons of the 90s recession could have dire consequences for some firms. To stick with the status quo when it comes to operating company vehicles, or providing unnecessarily generous cash allowances to staff, may serve to exacerbate the impact of the downturn on their business.

The key change many companies made during the early 90s recession was to run their vehicles for a longer periods. Generally, this meant switching the lease contract from two years to three, which was a watershed moment as many in the industry believed that employees wouldn't put up with driving an aging vehicle and that maintenance costs would be prohibitive.

In reality, this never happened as the recession took hold and the power switched from the employee to the employer. Not many staff risked rocking the boat when jobs were under threat and, in any event, cars were becoming much more reliable and better suited for higher mileage use without any noticeable difference. Today, almost two decades later, three year leases are the norm, but that's not to say running fleets longer is the sole solution.

Lloyds TSB Autolease says forthcoming changes to the corporation tax regime, due to hit on 1 April, provide the perfect platform for firms to re-evaluate their employee benefit schemes, including company cars. The changes to capital allowances announced by the Government in November's pre-Budget report stipulate that employers can make significant tax savings by 'greening' their fleets.

Mark Chessman continues: The benefits of running fleets longer are worth considering - it usually reduces the monthly lease rate and also puts off the risk attached to starting a brand new lease contract. That's an important factor when you consider that most arrangements include an early termination fee if the car is returned because the driver resigns or is made redundant.

But, we would argue that employers' overriding concern should be getting to grips with the new capital allowance regime, which rewards those fleets that are able to introduce new low emission vehicles. They not only hold their value better, and are therefore cheaper to lease for the employee, but also contribute to lower fuel and tax bills for the employer. It's a win-win situation.

Just as the last recession acted as a catalyst for fleets to lengthen their lease periods, I think this time around we will see more firms reducing the choice of vehicles employees can pick from. Companies have a duty to explain the potential changes to their workforce, but in the current climate we would expect them to be understanding of the situation. Besides, employees are more environmentally aware and are trying to find ways to reduce their personal expenditure.

Lloyds TSB Autolease says many companies that have traditionally given an open choice of vehicles to their employees have largely not reversed the policy, but are coming under pressure to do so.

Chessman concludes: Leasing companies like our own can work with firms to develop a cost effective fleet strategy and are generally able to offer a bigger discount to businesses that are able to switch to a narrower range of more efficient makes and models.

Six cost saving fleet tips:

Reduce employees' car choice to vehicles emitting less than 160g/km of CO2 to benefit from the 'writing down allowance' against tax, Vehicle Excise Duty and employer's National Insurance costs

Look at the benefits and risks of extending your existing vehicle lease policy. For high mileage vehicles it could prove a false economy

Consider whether 'cash takers' are allocated an appropriate allowance to run their own vehicle. Is it too much and is there a more efficient way to pay them?

Make these changes before 1 April to benefit from the tax breaks offered by the new C02 based corporation tax

Contact your leasing company to review your fleet policy for other cost leakages that, if fixed, could save you money