The effect of COVID-19 on company cars

Brian Joss – The nature of Full Maintenance Leasing (FML), as an alternative way of acquiring vehicles,  will likely be changed for some time as a result of COVID-19.

Rather than upgrading fleets after three years, companies may have to look at extending their lease periods as it is may provide a more appealing option than purchasing new vehicles.

A reduction in revenues may necessitate lease renewals. The managing director of MasterDrive, Eugene Herbert, explains: “It is more cost-effective to extend your current leases than what it is to upgrade to new vehicles. If your business faces an uncertain future, like many currently do, it also provides you with more flexibility when you extend by a year or two, rather than signing a new lease.

 “Vehicle leasing may also become more appealing to companies that previously purchased vehicles. International research conducted by Mercury fleet studies, says that switching to debt financing or leasing can have significant cost savings, sometimes reaching into the millions for some companies. This is because it allows for more efficient use of financial resources and allows for younger, more modern fleets.”

COVID-19 has ushered in a growth in remote offices and reduced time on the roads. “Consequently, we may also see a shift away from company-owned vehicles toward vehicle allowances instead as the use of remote offices and virtual communication increases. As is the case with extending a lease, this also provides the company with cost-savings and greater flexibility during uncertain times.”

If your vehicles are company-owned, looking after the vehicles properly and ensuring your drivers are properly trained is essential in extending the life of your vehicles. “Less time on the road will allow you to keep your vehicles for longer, however, this does not mean the state of those vehicles can be below standard. In addition to doing regular maintenance and maintaining the service schedule, you need to ensure that the way employees drive does not add extra strain.

 “Training employees how to drive defensively not only reduces the accident rate within your company but saves fuel and reduces wear and tear. By eliminating costly behaviours such as harsh acceleration or braking can help increase the kilometres you get out of your vehicles.”

Fleet policies and company car benefits will likely change as a result of COVID-19. “The virus has changed how we make use of company vehicles and, consequently, this requires a change in leasing, purchasing and vehicle benefits. If you have not already reassessed your company policy, it may be worthwhile to do so,” says Herbert. 

CAPTION: Cost-effective: extending current leases. Picture: Markus Winkler/ Motorpress

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