In the Essential Services sector, like all organisations managing a fleet of vehicles, there is always a need to add vehicles to the fleet. This could be to replace older vehicles, meet additional service requirements for short or long-term contracts, expand existing service levels, or comply with low-emissions targets or enhanced safety policies such as the Direct Vision Standard (DVS).
So, what decisions have to be made? Do you opt for outright purchase or a finance lease arrangement, or do you look to contract or flexible hire options?
Ultimately, your decision will depend on how the vehicle will be used within your organisation. Whether you wish to take on the financial risks of owning and running that asset, to have greater control of the asset, including any resale, or to have operational use of an asset without taking on any liability for repairs and maintenance. In all circumstances, having the right-size fleet to meet your operational needs is important, so having access to a wide range of vehicles is vital. This is where fleet hire companies can help, so in this article, we will look at the various hire options available and how vehicle hire can help with operational efficiency.
As a starting point, it is important to distinguish between a finance lease and a contract hire. While many people assume they are the same, the real difference comes down to who assumes the risks associated with the vehicle and ownership. In a finance lease, the lessee assumes the risk of the asset as they are effectively purchasing the vehicle. With contract hire, the lessor is liable for the risk as they retain ownership.
Vehicle rental solutions can offer your fleet greater flexibility, enabling you to change vehicles more frequently and easily adapt to changing business needs. It can be particularly beneficial at the moment when most fleets are facing a transitional phase where technology and fuelling options are changing, improving, and in reality, still evolving. Making a commitment to purchase a high-value asset that will fit your needs, now and in the future, is somewhat of a difficult task.
When referring to vehicle rental options, fleet and transport managers need to select the options based on their requirements, whether that is short-term, long-term, or flexible vehicle hire.
Here’s a breakdown of each type of hire:
Long-term rental – contract hire
This type of rental involves adding vehicles to your fleet on a fixed-term contract basis. Rates are fixed and based on vehicle type, mileage, and contract length. At the end of the contracted term, the vehicle is returned to the leasing or hire company. With this type of vehicle hire, there may also be extra charges to account for, such as exceeding contracted mileage or for repairs for vehicle damage that doesn’t fall within what is considered acceptable fair wear and tear. There is also no option to own the vehicle i.e. buy it outright, at the end of the contract. This means you’re simply paying for the service of using and looking after the asset.
The monthly contract hire rental payment usually covers tax, an agreed mileage allowance as well as service and breakdown cover, although service levels will vary amongst providers.
The rental payment is calculated by forecasting depreciation based on the vehicle’s original cost, expected mileage, and contract length.
Short-term Hire
With this type of vehicle hire, vehicles are rented for periods typically ranging from one day to twelve months. It can serve as a temporary solution to fill gaps in vehicle delivery times or for staff who need to drive for work but would rather not use their own vehicle or don’t have access to one. It also helps in providing vehicles for employees on short-term or temporary contracts, as a supplement to a large fleet, or to offer a pool provision.
Short-term hire often has insurance included and can also provide a solution to mitigate the impacts of VOR time, whether this is planned for, or otherwise.
Flexible Vehicle Rental
Flexible hire allows fleet managers to access vehicles without committing to long-term contracts, offering greater adaptability to meet changing or seasonal demands. Different providers have varying minimum rental terms, but some offer complete flexibility.
In contrast to contract hire, with flexible hire, once the rental term ends, you can choose to return the vehicle or continue hiring. Also, you have the option to change vehicles, meaning you can consistently access the latest technology and vehicles that suit your fleet’s needs. Additionally, you can switch vehicles or remove them if your organisation experiences reduced demand for a particular service function.
Most flexible rental fleets now offer a wide range of vehicles, including specialist vehicles. Therefore, if you need vehicles to fulfil short-term contracts or have an infrequent need for a certain type of vehicle, there is no need to tie up capital in such an asset. In the current climate, flexibility is essential for achieving efficiency savings and so is ensuring that as an organisation, you are not paying for assets that aren’t being frequently utilised.
Flexible hire can also help with future-proofing your fleet, as with the right partner you can be certain of being able to hire vehicles that will meet your needs now and in the future to meet demand.
As more Ultra Low Emission Zones (ULEZs) are implemented across the country, you can choose to hire vehicles that meet the new compliance requirements. For example, you can hire vehicles that comply with the current Direct Vision Standard (DVS). As a fleet or transport manager, this means you won’t have to worry about acquiring new vehicles or retrofitting your current ones.
Operating a fleet comes with its own set of challenges and costs. These can include unexpected maintenance repairs that ultimately lead to vehicle downtime.
Ensuring that vehicles are well-maintained and compliant with legal regulations is crucial for fleet safety. However, managing these responsibilities can be burdensome for many organisations. Flexible vehicle hire can ease this administrative load. With a flexible vehicle hire supplier, all paperwork and servicing are taken care of, allowing you to focus on operating the vehicle. Flexible vehicle hire can also help you work more efficiently. To ensure the safety of your operatives and to increase the visibility of your fleet, hire vehicles can be provided with the latest advanced software systems, telematics, cameras and other enhanced safety equipment.
When you opt for vehicles on a flexible rental basis, you won’t encounter early termination charges, and the pricing is clear. Flexible vehicle hire rates are typically more competitive than short-term vehicle hire. Additionally, you can return vehicles when they are no longer needed without facing penalties or extra charges. However, it’s important to note that service levels and hire terms may differ among companies, so be sure to review the complete terms of hire before using any service.
Helping with fleet electrification/ decarbonisation
In line with the growing advancement of vehicle fleets in the Essential Services sector, fleet hire can address a growing number of challenges. For instance, as there is a widespread push to decarbonise operations, fleets are looking for feasible options to achieve strategic goals. This often involves acquiring an electric version of a current internal combustion engine (ICE) powered fleet vehicle. While there are an increasing number of Electric Vehicles (EVs) in this sector, there is still a significant cost disparity between these and their ICE counterparts, especially with heavy goods vehicles (HGVs) such as refuse collection vehicles (RCVs) and fire appliances. Opting to hire this sort of vehicle will help operators test out these vehicles in real-world situations, making sure any future capital investment in this sort of vehicle if required, will actually be a viable and cost-effective option. Hire can also bridge the gap for operators with vehicles on order or can be viewed as a longer-term solution.
Helping with supply chain issues
Supply chain issues have also forced many operators to keep vehicles on-fleet, that would otherwise been disposed of under normal processes. Inevitably, these older vehicles are more likely to break down and any operator in this position, must have ready access to reliable short-term hire vehicles, to minimise the disruption to fleet operations and service delivery.
How fleet hire providers can help
Sophisticated fleet hire providers typically have a wide network of workshops and therefore can give assurance to operators that vehicles can be fully supported in facilities with skilled technicians and the correct equipment.
The increasing demand for fleet hire solutions has meant providers have adapted to the specific needs of complex fleet operators. Many fleet and transport managers will have experienced delays with Service Maintenance and Repair (SMR) mainly due to shortages of the necessary technical and mechanical skills in the sector. Fleet hire companies are in a better position to attract those skills, with a dedicated network of workshops and skilled professionals. Therefore, maintenance regimes for the complex vehicle assets they own and repair are likely to be more efficient, resulting in minimal vehicle off-road time for their customers.
It is vital it is to engage with the right fleet rental supplier. The best vehicle hire providers will recognise that a fleet manager has a huge array of responsibilities surrounding operational risk and compliance. They will also stay abreast of all the latest innovations to ensure that their range of vehicle options will meet the increasing demands of fleets. This takes investment on the part of the hire company, so the operator should be suspicious if vehicles are being offered at suspiciously low rates! When engaging with a supplier, it should be asked how they support and maintain their fleets and what the maximum age a vehicle is allowed to reach.
Remember to carefully review suppliers on all levels. Keep in mind that the best supplier may not always be the cheapest. The AFP has found that some unscrupulous hire companies are providing low-quality vehicles to fleets at cheap rates, which only adds to the challenges faced by operators. Therefore, it’s important to ask the right questions and challenge any sub-standard practices. Whether a vehicle is purchased, leased, or hired, your operational and duty of care responsibilities remain the same.
