Opportunities do exist to reduce fleet costs and release cash.

The pressures on cash flow and cost management as a result of 6 weeks of Covid -19 lockdown must be impacting heavily on fleets.

Considering that fleet is No 2 or 3 in your hierarchy of costs, it also ties up significant amounts of capital, it must surely be an area for immediate attention but also an area of opportunity to reduce costs or release cash.

What are these opportunities?

Release cash by right sizing your fleet or considering refinance options such as sale and leaseback. As a project the right sizing of your fleet is not simply about reducing fleet size it can be about replacing, as examples, a heavy truck with a smaller and less expensive vehicle or adjusting fleet to compensate for the benefits of work from home. The exercise is about knowing and analysing the utilisation of your fleet and balancing the fleet structure accordingly. It can result in the retention of newer vehicles where fuel and maintenance costs are less. Ideally it will result in a smaller fleet and the sale of unwanted vehicles. This will release cash.

Alternatively consider a sale and leaseback option to release cash. This option will be applied to newer vehicles in good condition and with a balance of useful life. If your fleet is currently financed there are a number of cost reducing options: - extend the period of the lease to match the expected life of the vehicle or consider the use of a residual value. Although the exercise is about cost management these options still require a conservative approach and it is important that any balances at the time of replacement equate to a conservative expectation of resale value.

Operating costs of fuel, maintenance and accident repair typically represent >50% of your total cost of ownership (TCO). Fleet management companies provide a range of specialised services that focus on reducing these costs. Savings of approximately 20% are claimed for maintenance and accident repair. Although the price of fuel has declined substantially due to reduced demand this is unlikely to continue in the medium term and the pressure to reduce fuel costs will remain. A saving of 5%, the benchmark for specialised fuel management services, could potentially generate savings of R250k pa for a mixed fleet of 100 vehicles.

When you consider that the TCO of a new R300k vehicle is approximately R120,000 pa there are a number of opportunities to save costs or release cash. An experienced fleet consultant will assist in identifying these opportunities by introducing new processes, policies, systems and suppliers.

Remember your cheapest vehicle is the one you don’t have!

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