Analysing vehicle choice and funding options are the key to delivering a healthy TCO to your business, says Rory Mackinnon, head of asset funding at fleet management firm ARI.
Controlling the total cost of ownership (TCO) of a vehicle is a goal shared by all companies that maintain a fleet.
However, it can be hard if you do not have complete transparency and insight into all the factors driving your costs. Although there are efficiencies and savings to be found throughout the entire lifecycle of a vehicle, it starts with the vehicle choice and funding method used. By understanding the best route, you will be able to capitalise on the opportunity and gain the optimum return on your investment from day one.
Choosing the wrong vehicle can result in unnecessary cost implications further down the line, and with such a varied choice of vehicles available it is crucial you conduct appropriate research and involve a broader audience to safeguard the business and ensure vehicle selection will serve the company for the long term.
It is also important to look beyond the purchase price and spend time defining your TCO goals. If you can do this, you can strategically leverage the value of that investment from the very beginning.
Once you have a vehicle that meets the needs of your business, deciding how to finance it brings about further considerations. The marketplace has numerous solutions, such as finance lease, outright purchase or contract hire, to name but a few, with each having their benefits.
But how can you guarantee the benefits work at both the acquisition and disposal stage?
Firstly, you must understand your financial position. Is cash flow a concern? What are the associated tax and accountancy implications of the choices you make? Are there any legislative changes that may affect your decision today or in the future? Aligning yourself with experts within your company and, where appropriate, utilising specialist fleet management providers, will enable you to gain the best solution for each vehicle type.
To make an informed decision, you must have access to every component of the funding method including the cost of funds, profit margins and residual values. This will allow you to gain actionable insight and help aid effective TCO management and ensure your return on investment (ROI).
ARI does this daily. Our experts support customers to make informed decisions from day one and provide the detail required to ensure they choose the right vehicle and funding method that will benefit them from the beginning through to the day the vehicle is replaced.
For more information on ARI visit www.arifleet.co.uk
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