What Is A Fleet Car?
A fleet car is the name given to a vehicle which belongs to a group of two or more cars which together form the commercial transportation for a business. Companies can either own a fleet car or lease, with typical examples including taxi firms and courier services.
Read on to find out all you need to know about fleet cars to help you decide if they’re right for your company.
3 advantages of a fleet car
Many businesses choose fleets because of the positive effects they can have on company image, finances and the morale of staff.
Here are three reasons you may want to consider fleet cars for your business.
1. Fleet discount
Dealerships and leasing companies will have special discounted prices when you purchase or lease a fleet of multiple vehicles from them. This can be as much as 10-15% off the price of each individual car when you purchase a certain number of models (usually 5-15 cars).
A lot of the time, a fleet deal will be a big win for a dealership or leasing provider in terms of hitting sales targets and enabling them to rotate stock. For this reason, they incentivise customers choosing to buy in bulk on a group of the same or even different cars.
It’s worth popping into your local dealerships when you know what type of cars you need and negotiating a discount with a member of the sales team. Alternatively, you can look online at websites for nearby dealers or lease car providers and enquire about fleet discounts in order to get the best price possible.
2. Affordable and well maintained
If you’re considering buying your fleet car(s), then you’ll be glad to know that there’s a whole market of second-hand models out there for affordable prices.
Understandably, used vehicles won’t be everybody’s first choice as they’re often associated with being ‘damaged goods’. However, fleet cars differ in that companies tend to sell them after one or two years of use, which tends to equate to around 20,000 to 40,000 miles on the car’s clock.
While this sounds like a lot, a fleet car will be required to have a strict maintenance schedule in order to ensure safety of drivers and upkeep of the company asset. As such, you’ll generally find that you can use it for another two or three years like the previous owner, while paying around 30% less due to its value depreciation.
Remember: Owning a fleet car means that you’ll be responsible for all service, maintenance and repair costs until you decide to sell it, which will also cost your business time and money. This could be suitable for a small business with less than five company cars, but those with more will tend to benefit from fleet leasing.
3. Tax relief
BIK (Benefit In Kind) tax rates for fleet cars tend to make driving a car way more affordable for employees than it would otherwise be to own or even finance it.
The way the current BIK tax bands work means that vehicles with lower CO2 emissions cost less each year. Electric and hybrid models are the cheapest, with 0% being charged for the 2020-2021 tax year and this only increases to 1% for 2021-2022 and 2% in 2022-2023.
Discover more about how company car tax works in our other guide.
3 disadvantages of a fleet car
Just like any business finance decision, there are a few considerations you need to weigh up before deciding whether or not fleet leasing is right for you/your business.
1. Maintenance responsibilities
Whether you’ve decided to lease a fleet of cars or purchase them, it’s important that the business you work for has a system in place for ensuring employees use the car correctly. Otherwise, you’ll face hefty end-of-lease damage charges for anything considered beyond ‘fair wear and tear’ or an equally expensive repair bill.
2. Choosing the right model
It’s important that when you’re looking at buying or leasing a fleet car that you choose the right model for your business. However, this requires you to take the time to consider what the needs of the company are and the budget you’re working with.
If you’re buying your fleet then this process could take even longer due to the greater financial risk involved with owning the vehicles.
3. Running costs
Besides having discounts available on such things as fleet insurance and the purchase price of the vehicles, the running costs of fleet cars are far from cheap.
For example, using a fleet car cost calculator we worked out that for the average operating cycle of three years/60,000 miles a standard Vauxhall Combo would cost £25,000 to run. This is almost 10% more than the list price of the vehicle, and takes into consideration fuel, depreciation and SMR (service, maintenance and repair) costs. On top of this, there was a total of £840 in road tax and £1,064 of National Insurance Contributions.
Of course, you can mitigate these expenses in a number of ways, including:
- Choosing fleet leasing – this way depreciation and road tax is taken care of, while maintenance can be added as an optional extra as part of any deal.
- Opting for a hybrid or electric car fleet for fuel savings and low tax rates or, in the case of EVs, tax exemption.
How many vehicles are considered a fleet?
The numbers differ depending on which company you approach for a fleet car. However, the general consensus is that at least three vehicles are regarded as a fleet.
In some cases you may find that in order to get a fleet of cars from a dealer, you’ll need to choose five. Each company will give you an option before you purchase/lease that will tell you what their minimum consideration is for a fleet.
Is buying a fleet a good idea?
You can get a good deal on used fleet cars when you buy them because they tend to have high mileage on the clock. In the same breath this doesn’t necessarily mean they’re in bad condition either, as we mentioned before that businesses tend to have them serviced regularly in order to ensure employee safety and smooth operations.
However, there’s a bigger risk involved when buying a fleet of cars that could make leasing a more attractive option. Not only will you lose company money on a fleet car when you come to sell it, but this process itself can be wasteful of business resources. Finding suitable buyers and arranging viewings, test drives and other intricacies is the last thing any person running a company wants to be doing.
There’s also the cost associated with maintaining it throughout its entire life cycle, which can lead to very expensive and unexpected repairs if it’s no longer under warranty.
On the other hand, if you choose a fleet lease this painstaking work isn’t necessary. Every few years you get to trade in your vehicles for new ones, and any faults which aren’t caused by driver error will be covered by the warranty throughout your contract.
What is fleet leasing?
One of the most popular methods of obtaining a fleet car is by choosing fleet leasing, whereby you effectively hire multiple vehicles from the same provider for 2-4 years.
The vehicles are always brand-new when you decide to lease, and payment is in the form of a deposit, followed by fixed monthly installments for the duration of the finance agreement.
There are numerous benefits involved with fleet leasing, which include:
- Payments are predictable and ‘off balance sheet’ – meaning liability doesn’t show on the company’s account.
- New cars for your business every few years – good for company image, staff morale and ensuring operations run smoothly.
- Warranty throughout your contract, road tax covered and delivery included – extra savings a business otherwise would have to tie up into a car it owned.
- 100% of the VAT on lease payments and any maintenance package can be reclaimed when the car is used for business use only, or up to 50% when a fleet car has been used for personal reasons.
- Low BIK (Benefit In Kind) tax bands on models which don’t emit high levels of CO2 – employees will be happy they’re saving money by not having to use their own cars for business purposes.
Can I get new fleet cars?
Fleet cars are available new or used. Depending on the needs of your business, you may find that it’s more profitable to choose new vehicles because they’re less likely to encounter problems which could suddenly halt your operations. Also, if they do happen to experience an electrical/mechanical issue, this will be covered in the warranty, so long as it didn’t happen as a result of an accident or driver error.
How much does a vehicle fleet cost?
The cost of a business fleet will vary depending on the size and whether or not you choose to buy, finance or lease it.
You can buy a used fleet car with high mileage (around 60,000-70,000 miles) for as little as £3,000. You would need at least three of these for it to be considered a fleet, meaning your total cost for the vehicles alone would be £9,000. Alternatively, you can pay less than £100 per month for a brand-new fleet car on a lease.
Fuel and running costs are the biggest expenditure when it comes to having a fleet vehicle. For example, a Ford Focus with a fuel economy of 48mpg would cost £6,256.80* for 60,000 miles.
*Figures courtesy of Fleet News Car Fuel Cost Calculator
What are the most popular fleet cars?
- Renault Clio
- Nissan Qashqai
- Ford Focus
- Vauxhall Astra
- BMW 5 Series
- Toyota Corolla
- Kia e-Niro
- BMW 3 Series PHEV
What is a ‘grey fleet’?
Grey fleets are when a company employs members of staff who use their own private cars for business use. It’s a good solution for businesses which don’t have the funds to purchase or lease their own fleet, and when the nature of the work means low mileage on the job.
Unlike a standard fleet, grey fleets are more difficult to manage due to the cars themselves not belonging to the company.
Driver self risk-assessments, mileage tracking and vehicle checks are important policies to include when allowing staff to use their own cars on the job. This is especially true when it comes to preventing accidents, as your business may be liable should this happen.
How to reduce costs of fleet cars
There are many ways that you can make fleet cars a cheaper solution for your company’s transport.
1. Invest in good fleet management
As we mentioned earlier, the importance of an accurate data report on all your fleet cars will ensure you’re able to form strategies that reduce your company’s vehicle spend.
For example, a fleet management system or company will be able keep track of how much fuel your vehicles are consuming on a daily basis. If this is a lot higher than originally predicted, then factors that influence consumption, such as driver routes, driving behaviour (i.e. aggressive acceleration, braking and gear changes will use more fuel) and vehicle performance can all be looked at and procedures put in place to reduce this.
The compounding effects of these savings will inevitably outweigh the cost of the fleet management system and will save your business lots of money.
2. Increase fuel efficiency of your fleet car
When you’re searching for suitable fleet cars to use for business, it’s wise to look at models which aren’t going to burn through as much fuel.
The average fleet car travels 20,000 miles per year, which can soon cost you thousands of pounds in fuel if you don’t have fuel-efficient models.
Many companies are now turning to hybrid and all-electric fleets which are proven to be cheaper to run than their fossil fuel counterparts.
A good example is the BMW 3 Series, which is available in a plug-in hybrid guise, with a whopping 201.8mpg that costs approximately £471.62* to fuel for one year/20,000 miles. Compared to the standard petrol version, which has a fuel efficiency of 47.9mpg, fuel costs approximately £1,984.76*, a difference of £1,513.14* per year.
*Fuel prices calculated using Fleet News Fuel Cost Calculator
3. Make use of discounts
Fleet buyers can get two discounts when they go through the process – one from the dealer and another from the manufacturer.
These discounts applied by the manufacturers and dealerships are available to businesses that buy large numbers of vehicles, also known as ‘volume-related bonuses’.
It’s a good idea to ask dealers or leasing/finance providers local to you what discounts are available and what the minimum number of vehicles is in order to qualify for it.
4. Consider fleet leasing
Because you’re only paying to use the fleet car when you decide to lease it, you won’t need to pay a huge upfront payment on a car which you then lose money on when it comes to selling it.
Unlike when you purchase a car outright, with a fleet lease you can put as little as three months’ worth of the rental price down as an initial payment. Or you can increase this to make the monthly payments lower in order to fit your company’s budget.
There are also added financial benefits involved with fleet leasing which make it cheaper, such as road tax and 100% VAT exemptions when the car is used for business reasons only.
Remember: As with any lease car, you’ll need to stick to the agreed mileage in your contract and keep the car in good condition to avoid any excess damage or mileage charges from the finance provider at the end of your agreement.
Want to learn more about finding the right car for your business? Then head over to our business car guides for everything you need.
Ready to find your ideal commercial vehicles? Compare prices for great offers on business lease deals from Moneyshake.