Today, ecology is sought for a company car and flexibility is sought for a leasing contract. Contracts have been shortened and financial leasing has gained popularity.
Diesel car under a four-year maintenance lease. Such a traditional basic solution for a company car is becoming less and less realized, and the pandemic year has further accelerated the revolution in company cars.
Flexibility and ecology are now more emphasized in the choice of cars.
“The service life of cars has been shortened quite a lot. There are really a lot of change drivers in the company car market here, ”says Fleet Innovation, CEO of the company car service company Sakari Viitanen.
The year 2020 changed the needs of many motorists as telecommuting became the norm.
Viitanen says that many companies woke up to how inflexible leasing agreements can be.
“Long-term rental responsibilities in both commercial apartments and cars came to mind. The cars were left unused, and the expenses were spinning, ”says Viitanen.
Viitasen according to him, companies had already applied for even shorter and more flexible contracts before last year.
According to a customer survey conducted by Fleet Innovation, change is accelerating rather than leveling off. Employee drivers are inherently reluctant to commit to their cars for long periods of time.
In times of uncertainty, companies also consider that leaving leasing agreements can be costly, for example in connection with collective bargaining and redundancies.
Leasing company CEO of Leaseplan Petteri Pihlas he also says there have been hopes in the air for contracts to be shortened. In principle, customers are interested in contracts of up to two years, and such can be obtained.
So far, however, the lengths of Leaseplan’s contracts have remained statistically unchanged. The reason is the economic realities, as the value of cars falls sharply in the early stages.
“Shorter contracts become more expensive,” says Pihlas.
Traditionally Finnish companies have favored maintenance leasing agreements, in which the car is usually leased for a three- or four-year contract period. The leading maintenance leasing companies are foreign Leaseplan and ALD.
In recent years, however, financial leasing has clearly increased in popularity, according to Viitanen. A finance lease is similar to buying a car in installments, and the company’s partner is a bank such as OP, Nordea or Danske.
Fleet Innovation is a business service provider that does not itself rent or sell cars. It often recommends financial leasing to its customers for cost savings and flexibility.
The background is also the accounting provision that came into force at the beginning of 2019, with which the financial leasing got in line with the maintenance leasing.
Viitasen according to which financial leasing usually becomes cheaper in terms of total costs than maintenance leasing. The reason is that the customer will have to pay the actual costs, not the budget.
Maintenance leasing agreements specify mileage limits above which an additional price must be paid. When the limits are exceeded, the motorist, on the other hand, seems to have paid in vain.
In addition, in a financial lease, the customer company can benefit if the resale value of the car is higher than budgeted. In maintenance leasing, the leasing company benefits.
On the other hand, in a finance lease, the company bears the risk itself if the residual value at the time of sale is lower than expected.
“Then comes the defeat. There is that downstream residual value risk, ”says Viitanen. However, this risk materializes very rarely, he said.
According to Leaseplan’s Pihlas, the perception of the inflexibility of maintenance leasing is partly incorrect. If the employee’s life situation or commute changes significantly, the contract may be changed to correspond to new mileage.
Customer companies can also be reimbursed if the actual costs of its leasing cars have fallen short of schedule.
Maintenance leasing is still by far the most popular form of company car.
Of the year 2020 phenomenon in the car market were downloadable hybrids. The emissions of a rechargeable car and the operating range of an internal combustion engine are many interesting combinations.
There are many choices in corporate car policy. The key is the question of propulsion: full electric, rechargeable hybrid, ordinary hybrid or internal combustion engine?
Comparing car cost calculations has become even more demanding. Similarly, the assessment of the development of residual value.
“Choosing a car has never been so difficult,” Pihlas says, laughing.
Pihlas recommends that companies now review their car policy at least every year and base their choices on the help of professionals.
Fleet Innovation’s Viitanen says that in many companies the starting point of car policy is still old practices. In some companies, company cars have always been touring diesels, and decision makers may never have tried rechargeable cars. Then the threshold for change is high.
According to Viitanen, companies should consider their car policy openly, as it means both cost-effectiveness and staff satisfaction.
For example, an absolute maximum price can sometimes become expensive if a slightly more expensive price could get a downloadable version of the same car.
“Then fuel consumption is eliminated and the resale value is better than with the corresponding diesel. The average cost can thus be cheaper, ”says Viitanen.
However, he stresses that in the case of rechargeable company cars, the company must ensure that they are also recharged.
For hybrids technical progress also creates uncertainty, even though their residual values are in principle good.
“Maybe it’s even safer to keep a hybrid for three years than four years.”
Another important choice is that cars are chosen according to need and not according to the ego of the employees.
“A sales cannon that drives in Lapland needs that four-wheel-drive SUV more than a CEO who drives along Ring Road number one,” says Viitanen.
Fleet Innovation’s CEO Sakari Viitanen
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source https://pledgetimes.com/working-life-company-car-contracts-change-shape-there-are-really-a-lot-of-change-drivers-here/
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