Fleet Management
One size does not fit all

Robert Barry reviews the structure of the various leasing products and services available to small, medium and large fleets. He asks the stakeholders how finance and leasing packages can be tailored to meet the ever changing needs of fleet users.

Flexible options for small fleets
According to Driveline director Lance Manins, protecting and managing cash flow is the main factor that determines the need for smaller fleet operators (with 1 to 60 vehicles) to have flexibility in the finance and leasing of their vehicles during uncertain times.
Manins says that more and more customers are investigating the option of leasing or financing for their fleets secondhand and ex-lease vehicles which offer reduced exposure to FBT and lower lease rates.  
This is a trend that started in 2008 after the global financial crisis, when unpredictable cash flows in smaller businesses forced owners to look at ways to reduce their operating costs and potential long-term debt liability.  
As well as offering customers the traditional finance lease, operating lease, hire purchase as well as sale and lease back option, Driveline has a product called SmartLease. SmartLease is a flexible agreement that gives customers several unique options during and at the end of
the lease.   
Lance says that unlike traditional leases, the SmartLease product does not incur the same early termination costs, eliminates refurbishment costs, and there is no restriction on the distance travelled. Most Driveline customers opt to take a non-maintained SmartLease, which will fund vehicle ownership for up to five years depending on the asset class.
“Our customers find it’s an extremely viable, cost-effective option, and an alternative with more flexibility than the traditional lease-model,”
says Lance.
“Economic conditions within New Zealand aren’t improving as quickly as many smaller business owners thought or hoped, and this has been reflected by the change in fleet behavior.
“We offer a transparent, fully managed partnership where clients know exactly what they are entering into and can manage their leases in sync with changing economic conditions.”
Driveline supplies leasing on all NZ New Vehicles and also offers customers access to more than 160 vehicles ex-lease and second-hand vehicles and can tailor a package to suit specific needs and applications.

Thinking strategically   
A relative newcomer to the New Zealand market, SG Fleet is headed by well-known fleet identity Geoff Tipene who says he has noticed two distinct trends in the finance and leasing market. One is that clients require their supplier to provide a more transparent and comprehensive fleet management offer, and the second is the return of clients to a fully maintained leasing option rather than a non-maintained lease.
Geoff says suppliers such as SG Fleet prefer to work directly with the driver of the vehicle in relation to any day-to-day matter, because with many businesses restructuring their operations, there is no longer a dedicated person on staff to just administer vehicles.
“More and more customers require their finance and leasing provider to manage and police their fleet policy and provide the administration function that once was done internally, but now many business operators don’t have that luxury of that resource anymore,” he says.
“At SG Fleet we see ourselves as that resource. We keep the customers fleet compliant and on the road. We then report to management in a formal, structured fleet review process. Alternatively the customer can obtain their fleet information at any time through our fleet intelligence software.
“In terms of leasing product, I noticed two and half years ago that there was a slight move away from fully maintained operating leases, because some customers thought they could save money by doing more themselves including the fuel card and accident management processes, but now that many no longer have an internal administration resource, they are returning to the fully maintained option.
“Many customers are now returning to the more traditional fully maintained leasing product with all associated risks being outsourced while they focus on their core business.”
As well as consolidating internal resources, Geoff also sees fleet clients making a concerted move to consolidate the number of leasing providers they employ.
“Why have multiple suppliers?” he asks. “Where is the logic in having a second or third supplier in order to save a few dollars up front when it may become more expensive in the long term.
“I totally understand when a customer’s policy requires pricing contestability however it is my view that if a new commercial relationship can be structured on transparency with measured KPI’s and consistent whole of life benchmarking the requirement of having multiple suppliers should be reconsidered”.
Geoff says that the SG Fleet team differentiates itself by being structured in a way that allows the business to be dynamic, nimble and offering a personal, hands on service to fleets of all shapes and sizes.
 
The holistic approach
According to FleetPartners national customer service manager Vern McLaren, over the past twelve months more and more companies are taking a more holistic approach to fleet management, finance and leasing.
“They want to know the total cost of ownership and there is a need to analyse each component of this, so that there is a total understanding of the real cost of running a vehicle,” he says.
“Providing analysis of the cost in their fleets with benchmarking to market best practice provides the insight that enables FleetPartners’ customers to access current best practice.
“Customers expect data analysis to make informed decisions upon. Delivering lower costs is essential, being able to compare savings achieved against a prior period is just as important to validate decisions.”
Orix Fleet manager Natalie Milich agrees with those sentiments and says that an increasing number of Orix clients have recognised the positive impact that fleet management expertise can have on their organisation, both financially and in ongoing management efficiencies.
“As such we have found a much higher demand for top level advice and assistance from clients looking to ensure their fleet performs at its maximum potential,” she says, “both in terms of transactional procurement advice and assistance, backed up with improved fleet management reporting capabilities and online management tools.” 
Vern adds that as more hybrid vehicles have become available and more affordable, they are gathering increasing attention from companies that need to marry fiscal responsibility with their corporate environmental policy.
The finance and leasing market has also been affected by the Japanese tsunami and the Thai floods affecting the supply chain of new vehicles for fleets. Vern says the Japanese situation was less disruptive than the Thai floods, which saw the manufacture of utility vehicles affected badly.
As a result the longer lead times were initially a surprise for many customers, but future expectations were managed through effective communication.   
“We are aware of the forecast increase in new vehicle sales volumes for 2012 placing pressure on the availability of stock, but it is not always for some customers to place advance orders when they are dealing with fluctuating demands for their products and services,” he says.  
According to Natalie Milicich, a positive side effect of the Japanese and Thai disasters has been the realisation by many companies that realistic time frames need to recognised when pre-ordering vehicles, to ensure delivery on the desired date in the future.
She says this has allowed a far more strategic approach to be taken when managing fleet replacements, and when correctly forecast, offers much greater certainty for managing staff expectation, fleet budgeting, and managing dealer stock levels.        
The adoption of new technology such as windscreen rain sensors in fleet vehicles has also had an impact within the finance and leasing market. Vern says customers who did not have glass cover under their insurance policy quickly reassessed that decision when faced with the cost of replacing a windscreen with rain sensors.
But according to Natalie Milich, driver aids such as auto headlights and windscreen wipers have had a negligible effect on the running costs of vehicles, because these were developed more as a convenient aid to assist the driver while underway.
An exception to this according, she said, would be automatic tyre pressure monitoring devices which have an obvious benefit in ensuring the driver is informed of under or over-inflated tyres, dramatically improving tyre wear and fuel economy.

The triple bottom line
For Toyota Financial Services, the fleet financing agenda extends beyond an obvious commitment to environmentally sustainable business practice and into a focus on their clients’ bottom line – or triple bottom line as some companies use now.
That in turn drills down into a focus on helping reduce greenhouse gas emissions and the carbon footprint of customer fleets, while at the same time reducing total cost of ownership.
“By a careful analysis of fleet performance metrics and identifying the opportunities to refine what is offered, according to each fleet’s differing parameters, a customised green solution can be put in place to reduce emissions and produce bottom-line cost savings,” says TFS national fleet sales manager Darren White.
Reducing costs is all about a fleet provider with the scale, stability and strength to make a meaningful difference. Toyota Financial Services says it has become an industry leader in its sector, leading in size, growth and, most importantly, stability.
TFS says it sets itself apart by taking the holistic view towards its services for customers, so there are long-term guarantees of a sustainable and very competitive overall solution.
Typically the market is inundated with product-centric providers and, while TFS says it has a remarkably strong product set, it can offer a wider range of broad spectrum solutions which go beyond simple product, and which fill its customers every need.
Among these is a reduction in fuel costs, critical to any company’s bottom line. The new breed of Toyota hybrids will clearly play a significant role in reducing fuel costs for both large and small customers.
Taking into account fuel price increases and the additional environmental benefits associated with hybrid vehicles in terms of low emissions and lower use of non-renewable fuel, hybrids are becoming increasingly attractive from an overall value for money perspective. The slightly higher purchase cost for hybrids than for petrol-fuelled vehicles can be offset significantly by the lower fuel consumption of the hybrid vehicles.
TFS says it offers a fully-customised package that caters specifically to the needs of the customer and it also has mechanisms in place to reduce fringe benefits tax exposure, so the total cost of ownership works out very favourably in every circumstance.
“We see the market can sometimes struggle with certainty around providers. For example some may come into the market with slightly lower rates initially than TFS, but typically that is not sustainable, and their customers can see severe fluctuation which clearly affects their ability to forecast accurately,” says Darren White.
“Or we see companies getting subsumed into other entities which then change the parameters on the customer unexpectedly or others may not be able to weather the kind of financial storms we’ve seen in recent years.
“However with TFS, our customers know that they’re dealing with a company that has what it takes over the longer haul, so they can rest assured in the knowledge that we have the longevity, strength and stability to ensure our customer’s security throughout our partnership.”
.
Think global – act local
National sales manager fleet Tania Betts says that with more than 30,000 vehicles under management, Custom Fleet has the financial and management capability to manage fleets from one vehicle to 3,500.
With the global backing of GE and the utilisation of the lean six sigma principles, Custom Fleet has the tools to help finance and leasing clients to manage their costs, enabling businesses to focus on hitting their targets rather than spending unnecessary time running
a fleet.
“More than ever the focus of fleet operators is minimising costs out of their fleet,” says Tania.
“Nobody can afford not to, regardless of whether they are a private corporate or government fleet, there is a country wide mandate to reduce costs.
“In the past people looked purely at the transaction, then they added service management to the equation, then accident management, now they want the complete package.”
There is no one size of finance and leasing package that fits all, according to Tania, and Custom Fleet tries to understand the client’s needs and expectations, and designs a specific package to suit them. She says taking a fully maintained operating lease helps to protect customers from the risk of increased servicing and running costs and also provides them with a competitive per km rate.  
“You need to have a look at the whole of life cycle costs on a vehicle, because the best and sharpest lease price up front may not be such a saving at the end of the period,” she says.
“Taking a short-term strategy with finance and leasing of vehicles is a mistake. Fleets need to adopt a long-term strategy so they can manage through challenging times of supply and demand, especially as emerging markets such as India and China swallow export vehicle production and natural disasters such as Japan and China also disrupt the supply chain locally.
“Changing and adapting to these circumstances is always a challenge, and many clients have realised they now need to order six months in advance because lead times are key if they are going to be able to replace their fleet vehicles when necessary.”
 
The benefits of leasing direct
Honda New Zealand marketing boss Graeme Meyer says financing a vehicle through Honda Lease Direct allows businesses to preserve their capital in a competitive economy while allowing staff to drive a new and efficient vehicle.
Lease direct vehicles account for more than 30 percent of new Honda sales in any given year, and this also reflects the need for certainty of cost in a fleet operation.
Meyer says Honda’s price promise philosophy allows SME operators to access the same Honda lease direct rate as large corporate clients, and that currently leasing clients are enjoying the benefits of lower interest rates.
“You can obtain a quality vehicle for the fleet at a sharp lease price with a strong residual value, thanks to the stance we have taken in the marketplace with our price promise,” he says.
Currently hire purchase finance is available on new and used Honda vehicles from 8.9 percent and customers can opt for a full maintained operating lease or a non-maintained financial lease.  
Honda lease direct can tailor suitable packages for leasing vehicles from 12 months through to 45 months and quotations can be obtained instantly online from
www.honda.co.nz .

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