Keeping the brakes on costs

Article Abstract:

A range of car provision methods are being made available to UK companies managing car fleets. These provision methods had become extremely important to companies for purposes of containing fleet costs as a result of changes in tax legislation, operational policies and heightened market competition among suppliers of company automobiles. There are five common classifications of provisions methods. These are the outright purchase, contract hire, contract purchase, lease purchase and finance lease. Another alternative method of company car provision is contract management. The six provision methods are characterized based on whether it is the company or the contractor/supplier who bears residual risk, balance sheet disclosure, and tax and capital allowances. Surveys indicate that outright purchase is the most preferred provision method, primarily with large-sized companies.

Management, Motor vehicle fleets, Fleets (Automotive)

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Rentals, residuals and running costs

Article Abstract:

There are several complexities involved in the purchasing and the accurate cost evaluation of company cars. According to Ford Motor Co, 29.65% of the 2.2 million new cars sold in 1988 went to fleets with 25 or more cars, and around 70% were bought or leased by smaller companies or individuals. However, small companies and individuals often do not evaluate company car costs correctly. The cost factors involved in company cars include depreciation, maintenance, and interest. Depreciation involves analyzing resale values, options packages, and dependability. It is also important to note that each make of car is depreciated at different levels. Maintenance figures also vary from model to model and proper evaluations involve analyzing reliability, repair prices, and parts prices.

Employee benefits

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Driving for the best deal

Article Abstract:

All cost factors must be taken into account when comparing contract hire to purchasing of company cars. When comparing contract hire rates to purchase rates, accountants need to remember that the one contract hires figure includes depreciation, relief vehicles, maintenance, breakdown, and funding interests, while the same figure for purchasing a car will be composed of a series of estimates. The comparison of various models for purchase involves a zero-based budget exercise at each individual vehicle level. Important factors that must be taken into account for comparisons include: direct expenditures and service benefits of contract hires; different discounting schemes for various models; resale prices and demand for various models; and replacement vehicle costs.

Analysis

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