For sure, UK businesses are already feeling the pinch as costs rise and consumer demand falters. At Opticar, we are finding that discussions with both existing and prospective clients invariably turn to the need to reduce corporate spend, or not to spend at all.

When a company gets into cost-cutting mode, it’s always the same areas of the business that come under the spotlight. As a sales and marketing man, I know only too well that the marketing budget is one of the first to take a hit although I’ve never understood why a business would want to reduce its exposure to its target markets at a time when sales are hard to come by.

IT, corporate entertainment (fair enough I guess) and recruitment, are all areas that come under the spotlight when times are tough. The worst scenario, of course, is headcount reduction. Morally speaking, when people’s jobs are at risk, the company really ought to be at the stage where it has nowhere left to turn.

But when there are critical decisions to be made, how sure are we that companies have satisfied themselves that they are as financially efficient as they can be?

When it comes to company car policy, the complexity and sensitivity of fleet strategy means that the extent of internal analysis is often restricted to inviting suppliers and manufacturers in to negotiate a few bob off the current rates.

In reality, this is a futile exercise and certainly not a recession beater, because any negotiated decrease today can be completely undone by an increase in manufacturer costs tomorrow. Or an increase in the finance rate. Or an increase in fuel costs (I could go on...)

And any self-respecting leasing company will be looking for ways to claw back any savings offered at the front end from the various unseen charges that can be applied at other times throughout the duration of the contract, not to “cheat” their customers but in order to ensure that they can maintain the running of their own business.

Without doubt, the cost to companies of providing a car benefit scheme is pretty huge when you bring together leasing rates, cash payments, fuel costs, insurance cover, administration overheads and all the other bits and pieces that contribute to it.

But as a “new face” in the fleet industry, it surprises me that so few companies really understand the real net cost of running a car scheme with the various tax disallowances, termination costs, national insurance implications and so on that need to be factored in.

This lack of in-depth knowledge at company level means that when fleet costs come under scrutiny, the easy fix is to get the suppliers to cut rates instead of looking inwardly at the internal inefficiencies of the existing fleet arrangements.

This represents the bigger picture for companies who are serious about cost savings from their fleets without devaluing the benefit to drivers. So how does it work?

Firstly, let’s look at those running one particular type of car scheme across the whole company – let’s say contract hire for the sake of argument. While this is administratively straightforward, it is also reasonable to assume that a contract hire type of arrangement will be financially suited to some drivers – but not to others.

For example, a driver of a Saab 9-3 Sportwagon doing 28k miles per annum, of which 22k are business miles, paying 40per cent tax and with an “all fuel paid” arrangement in place would cost the company in excess of £3,000 net per year less if the same car was provided as a PCP (personal contract purchase).

The opposite can apply to a company that offers an ECO (employee car ownership) scheme only to its drivers. The same driver, in the same car, driving 20k miles per year and 3k business miles would cost almost £1,000 net per year less if he was driving the same car in a contract hire agreement.

A “one size fits all” scheme costs money. So logically, it follows that for a company to make serious savings from the cost of running its fleet, it really needs to consider ways of providing a mix of vehicle funding options for its drivers.

While some companies do offer a choice, it is often more by way of lip service than to maximise cost efficiency. Neither the company nor the drivers are able to determine the financial pros and cons of the options available, the wrong decisions are made, and the benefit of mixed funding falls down.

So in order for a mixed funding scheme to work and deliver the level of savings that a company will never find from supplier negotiations alone, it needs to ensure that the following criteria are met:

• That drivers fully understand the cost benefits of the funding options available to them at the point of decision-making

• That the scheme is efficiently administered and meets the expectations of the driver population

• The benefit of the chosen funding option is maximised throughout the duration of the contract.

At Toomey Opticar we deliver a unique, integrated online fleet management system to major companies, enabling the full benefit of mixed funding to be realised.

Using our car selector module, individual drivers can easily identify the funding option that provides them with the lowest cost way to engage with the car scheme by comparing and contrasting online net monthly cost, by model, by funding type.

Having ensured that the driver is directed to the most suitably funded contract type, we enable maximised cost efficiencies throughout the duration of that contract by using our monthly online mileage logging module to allocate and use every available AMAP (approved mileage allowance payment) against every business mile recorded. There is no over or under usage (so no year-end tax reconciliation needed) and so absolutely no tax leakage from the scheme.

We collate this information and report it to payroll each month. This is where the bulk of the savings are generated, and why the savings are long-term and sustainable.

So, by delivering a mixed funded fleet strategy, the client company will realise substantial cost savings and maximise tax efficiency, eradicating expensive and unnecessary tax leakage throughout the financial year.

Drivers benefit because they are able to identify the lowest cost way to engage with the company scheme, and if they were previously restricted to a company car list, they now have a wider choice through the addition of PCP as an alternative to a company car.

To conclude, before a company makes the decision to cut budgets or people elsewhere in the business, and before it hauls in its fleet suppliers to go through the futile exercise of a price review, there is a responsibility – perhaps even a moral responsibility – to ensure that significant amounts of cash aren’t leaking from the business in areas that aren’t fully understood or therefore not addressed.

In the area of fleet, this can amount to hundreds of thousands of pounds each year, and comes with the added benefit of making the car scheme more accessible to drivers.

Fleet finance may seem complex, but there is someone out there to help you!