Contract hire deals for company cars offer duty of care protection, but does the choice of marques compare to the freedom of cash allowances, asks Jamin Robertson
If you read nothing else, read this ...
- Duty of care obligations have encouraged some organisations to opt for the control of company cars over cash allowances.
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Duty of care obligations are forcing employers to take another look at company cars and, in order to offer a choice of marques, some are turning to contract hire deals. However, the cash-for-car option still remains popular as Employee Benefits fleet research 2006 shows 77% of employers provide cash allowances.
But with a fair degree of choice now available to many drivers of vehicles procured under contract hire deals, the company car need no longer be an unattractive alternative to cash allowances. Dean Woodward, consulting and risk manager at DaimlerChrysler Fleet Management, admits the introduction of driver choice within a contract hire deal is unlikely to net organisations the lowest possible price.
"Employers will always find themselves compromised when they're faced with the dilemma of choice versus cost. But you can offer freedom of choice within a restricted environment, for example, by offering any car as long as the whole life cost is within £25,000, or it has a [Euro] NCAP [crashworthiness] rating of four stars. If you put those parameter controls in there, you can still have freedom but the employer holds the key to the costs. The downside with freedom of choice is that you don't enter into the economies of scale you would with a [single marque deal]."
Marcus Puddy, fleet solutions consultant at Lloyds TSB Autolease, says employers looking at contract hire deals should focus on the whole life cost of a vehicle, which includes the residual value the car will attract upon disposal. This makes it possible to lease a quality marque that depreciates at a slower rate compared to a basic model, without much variance in cost.
Liz Hollands, fleet manager of property firm DTZ, has noticed a slight drift back to company cars among the firm's 900 drivers. Some 20 drivers requested a switch to cars in 2005, although over 57% of staff still opt for allowances. Cars are funded through contract hire, and DTZ offers a virtually unlimited choice.
She explains the policy supports its recruitment strategy, and might not suit the budget of all firms. "[Staff] can have any vehicle they like as long as it's not a two-seater. We might be able to save money [by limiting options], but we might not attract the best people." This follows the wider trend among organisations returning to contract hire. "Where there has been [cash allowances] previously, employers are going down the multi-marque route," says Woodward.
Roddy Graham, commercial director at provider Leasedrive Group, concurs. "Company car schemes tend to be very generous with an excellent choice. Big manufacturers have a very good range of cars and there are fewer cases of people saying 'there's nothing that I want to drive'."
Overall, the future of the company car appears to be brighter than first predicted after the introduction of CO2 taxation. But employers must be aware that sweetening the deal with greater choice comes with a cost burden.
