Whole Life Cost - The True Cost of Motoring

Our whole life cost approach helps fleet managers make smarter decisions about which company cars and which leasing contracts will cost them less in the long-term.

(Never heard of whole life cost? We've got a definition and infographic just for you: What is whole Life Cost? >>)

In these uncertain economic times, fleet management budgets are under pressure and yet calculating the best deal on company cars has never been more complex. Fleet managers have to walk a tightrope balancing competing considerations: your employees want the sexiest or most prestigious car you can source at the lowest tax costs to them, whilst the boardroom wants the costs kept under tight control.

Lease rental accounts for less than 50% of a fleet budget.

Traditionally managers went with the cheapest rental cost – a simple calculation derived from the purchase price of a vehicle, finance and maintenance costs. However, in today's complex financial environment, that simplistic approach almost guarantees that you will spend more than you need to. Did you know that, on average, lease rental (i.e. contract hire) accounts for less than 50% of a fleet budget. That's why whole life cost analysis takes into account CO2 taxes, fuel, maintenance and servicing too.

The often thankless job of the fleet manager falls to different people, depending on the organisation.  For some, it is the task of human resources, for others it is the CFO who manages the fleet. For smaller companies, it could be anyone from the MD to the office manager.  So how do these individuals make the most out of their fleet? We've got some tips, no matter what your role, that will turn you into a fleet management hero.

Step 1: Fact Find

There are so many factors to consider that company car finances can be a labyrinth to the inexperienced. Monthly lease costs, purchase costs, environmental factors, depreciation and residual value, taxes, fuel costs, and maintenance costs: all have to be taken into account. This is called the whole life cost of the vehicle. And, of course, some of these factors will alter from month to month and year to year.

Using an outside fleet management specialist can help the individual saddled with the job of the fleet manager.  Simon Homer, Covase Director, noted, "we use a unique algorithm, which is updated regularly, that evaluates all relevant factors, and can produce the most accurate possible estimates of the whole life cost of a vehicle – which is to say its true cost. Looking solely at the monthly rental gives you only part of a vehicle’s expense. It is common that two different vehicles within your fleet with the same rental cost will have two very different whole life costs. Just because the rental cost is low does not mean your total outlay will be."

In a nutshell, outsourcing to a fleet management specialist might be a good way to help you save time, money, and allow you to get back to your regular job.

Step 2: Maintenance Service Options

A fact of life is that cars need regular maintenance, servicing and will sometimes break down. If you are in charge of the fleet, and this is not your main task, you just want to get back to work.

You can get bolt on services through companies like the AA, which can become costly if not managed properly.  Basic service plans from car companies are an option, but, depending on the plan, take up even more of your time. Or there are fleet management solutions like Covase's maintenance management. Simon Homer commented, "Our job as fleet management experts is to make other people's jobs easier. At Covase, we have fleet management packages based on real customer need, which means that our clients get the exact level of service they need, and, because they can upgrade/downgrade whenever they need to, it's totally flexible to their business."

Step 3: Talk Tech

It’s a brave new world, and the advances in fleet management technology are astounding. Things have gone beyond your basic GPS to track your fleet, and into the land of advanced telematics systems (which we will be talking about in our next article in this series).

You can now not only track your vehicles with GPS, but also have integrated systems that, in an event of a crash, will store and deliver data about the incident. We spoke to Charles Smith, CEO of Collision Management Systems, which is a provider of telematics based collision management software "Telematics software can help your company in many ways when managing a fleet. When an accident occurs, the data derived helps your insurance company to make the correct decisions.  In the longer term, the data collected helps negotiate better rates that effect that all-important ‘whole life cost’ of your vehicles and fleet."

What are the benefits of telematics?

This leads us to the questions of whether or not you need advanced telematics software, will it be beneficial, will there be a return on investment for the company, and how it will affect the whole life cost of your fleet? Will having a fleet management service help your organisation? Will it save you money?  

Based on an evaluation of our case studies over the past 5 years, we have found that nine times out of ten there will be significant savings to be made. But to truly answer those questions, Covase and Collision Management Systems both offer a free assessment of your fleet to explore just much they can save you.

Take five minutes, pick up the phone and see if our fleet management team can help you save time and money.


Simon Homer is the Director at Covase, fleet management and vehicle leasing specialists.

Contact Simon for further information at 0345 369 7100 | simon.homer@covase.co.uk