TechnologyAccounting SoftwareFleet – Models on the road to the top

Fleet - Models on the road to the top

Steve Banner enquires how important prestige marques are to company car drivers and looks at cost-effective and fuel-efficient options gaining ground.

Employers hoping to tempt bright young – or not so young – accountants to join their firm by dangling the keys of a Ford Mondeo or Vauxhall Vectra in front of them aren’t likely to get too enthusiastic a response. But show them the keys of a top-of-the-range Volkswagen or Audi and they’ll sign a contract with you quicker than you can say ‘speed cameras’, ‘magistrates’, or ‘three points on your licence’, say car fleet experts.

‘There’s a big increase in interest in VWs, and a massive demand for Golf GTIs in particular – far higher than expected,’ says Nick Gafney, group marketing manager at vehicle management company Velo, a subsidiary of Kleinwort Benson.

‘Audi and VW are even making big inroads into traditional BMW and Mercedes territory, although BMW and Mercedes remain brands to aspire to. Accountants still like these prestige marques.’

Arthur Dalziel, director, marketing communications, at GE Capital Fleet Services, agrees prestige remains important. ‘They want the classic European stuff, and many of them will still go for a Mercedes rather than a sporty BMW,’ he says. But many accountants are prepared to consider a prestige Japanese marque, says Barry Chaplin, director of sales and account management at PHH.

‘Lexus has developed a good name, and is considered by some people who drive Mercedes and BMWs as a viable alternative,’ he says.

‘They’ve done an incredible job on their branding.’

Hot-hatch revival?

So does the popularity of the Golf GTI herald a revival of the fabled ‘hot hatchback’ of the Eighties? Not really, Gafney replies, because the GTI has grown up. ‘If you look at today’s Golf and compare it to the Mk I Golf, the progress has been massive,’ he observes.

‘The original Golf was more the size of today’s VW Polo. Today’s Golf is big enough to appeal to drivers who wish to downsize, and there’s a trend towards downsizing.’

How far is any trend in that direction influenced by fears that company car drivers will be hit by the proposed carbon tax? Due for introduction in April 2002, it will lead to drivers being taxed according to the amount of harmful pollutants their car exhausts produce.

A percentage of the list price will also be taken into account when calculating liability.

‘It’s not too much in people’s minds because the government hasn’t been that specific about what it plans to do,’ says Gafney. ‘And while having a vehicle with a 4.5-litre engine might cost you more, some big engines are going to be cleaner than some small ones.’ Dalziel agrees. ‘New vehicles are very good when it comes to carbon dioxide emissions, so perhaps drivers may not have too much reason to worry,’ he says.

A more likely reason for downsizing is that the current benefit-in-kind tax regime – based on a percentage of the list price which reduces the more miles you cover – is starting to bite.

Is there any indication that accountants and other middle or senior managers are moving away from people carriers? ‘People carriers remain a popular choice, but there’s a trend towards smaller ones,’ Gafney says. ‘They’re enjoying a significant increase in popularity.’

Again, we’re talking about downsizing, and it is affecting the four-wheel-drive sector. ‘There’s a core market for 4x4s among fleet drivers, and that’s holding up well,’ says Tim Rankin, business development director at Dial Contracts.

‘They’re usually favoured by employees who want one because it fits their personal lifestyle. But there’s a switch away from big 4x4s with V8 engines and a thirst for petrol.’

Instead of moving to smaller people carriers, some drivers are switching to roomy executive estates, according to Rankin. ‘The Saab 9-5 and Audi A6 Avant estates are two examples. Not many users really need all the seats in a six or seven-seater people carrier, and there are performance and driving dynamics considerations to bear in mind. But it’s often the “I’ve had one of those, now I want something else” mentality that prompts drivers to change.’

Chrysler’s Voyager people carrier fared badly in crash tests conducted by safety experts Euro NCAP, performing poorly in front-end impacts. But that in itself won’t put people off that class of vehicle, says Rankin.

‘If somebody wants one, and safety is a key factor, then there are vehicles that meet their needs,’ he observes. ‘Renault’s Espace, for instance, achieved a four-star rating.’

Chrysler claims in response to Euro NCAP’s findings that studies conducted by the Swedish and American insurance industries have concluded Voyager is one of the safest cars on the road. It points out their data reflect driving conditions faced by motorists every day.

The lack of clarity from government on how the carbon tax will be calculated could affect diesel. Diesel carbon dioxide exhaust emissions are lower than those generated by petrol, and cutting carbon dioxide output is a priority. But diesel emissions also include harmful particulates. ‘It seems likely the tax treatment of diesel cars will be weighted to take this into account,’ Gafney predicts.

This is backed up by Dalziel. ‘Diesel could become a lot less popular in the future. And diesel residuals are dropping.’

It would seem a pity if diesel does lose out given the highly fuel-efficient engines being introduced by Peugeot, BMW, and Mercedes among others. ‘And they’re far better than previous generations of diesel in terms of noise, vibration, and harshness,’ Rankin remarks.

Residuals help determine contract-hire rates, and are of particular importance to fleets choosing vehicles on a whole-life-costs basis. The more a car will fetch second-hand, the more competitive the contract-hire rate that can be quoted.

So if there’s a swing away from people carriers in the new vehicle market, does that mean that second-hand values will suffer, and contract-hire rates will rise as a consequence? Not necessarily, says Rankin.

‘Just because a vehicle isn’t popular in the new market, that doesn’t mean to say that it will be an unpopular used buy,’ he observes. ‘That said, running costs – fuel consumption and servicing charges – are important to second-hand buyers, and the most popular people carriers so far as they are concerned are likely to be those which offer good fuel economy.’

The same can be said of 4x4s. Fuel duty is set to keep increasing, so there’s going to be less interest among used-car customers in huge off-roaders that guzzle gas. That is going to be reflected in contract-hire rates, and possibly in the willingness of fleets to acquire them.

‘Big people carriers and 4x4s are also comparatively expensive to maintain and repair, and that has to be taken into fleet calculations,’ says Mark Cowling, chief economist at the CAP used-car price guide.

Single-badge deals

While many accountants work for firms with a flexible user/chooser policy, others are employed by big companies which have signed single-badge deals, often with Ford or Vauxhall. Though much depends on the nature of the agreement, that does not mean accountants are necessarily condemned to driving an upgraded salesman’s runabout.

‘Remember that General Motors, Vauxhall’s parent, owns Saab, while Ford owns Volvo and Jaguar,’ says Gafney. ‘That means the new Jaguar S-type is within the Ford stable.’

And Chaplin points out: ‘Volvo’s S80 is on a par with what Mercedes and BMW have to offer,’ .

How far are respectable, middle-aged accountants now throwing caution to the wind and going for two-seater convertible sports cars like Mazda’s MX5? ‘You get some of that, but you’re more likely to see it among the ones who have gone for PCP – personal contract plan – schemes, and who don’t really have a business need for a car,’ says Gafney.

According to Dalziel: ‘A few people in their thirties might go this route, but there’s no indication of a big move. Older drivers who want a sports car will probably go for something like an old Austin Healey 3000 that’s been restored.’

The flexible approach to company cars is gaining ground. NatWest is withdrawing company cars from over 4,500 managers, and offering eligible employees cash settlements instead. The money can be used to pay for a vehicle purchased privately, or for a personally-leased car acquired through British Car Contracts, a NatWest subsidiary.

Steve Banner is a freelance journalist.

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