Downtime and Van Selection

The Van choice paradigm – Budget or reliability?

The van choice paradigm has always been one of the biggest challenges for fleet decision makers who take their jobs seriously and look to add value to their fleet. This isn’t about global emission footprints, this isn’t about brand loyalty and popularity of van selection, this is about brass taxes and costs, and what vehicles are suitable for which applications with consideration of whole life costs tangible and intangible.

Deloite, Fleet News, and various OEM’s offer some fantastic tools in the domain of whole life costs, often designed to focus in on the tangible cost elements associated with vehicles on fleet. Maintenance, corporation tax relief, fuel spend, insurance, purchase price vs residual values, and cost of funding, these are all key factors in the decision-making process. But they feel very much focused on a car acquisition that bends into van (commercial).

So that all sounds great, but what does it really mean?

Whole life costs have long been a focus of car and van fleets, demonstrating which funding methods work for which applications, considering fuel costs, residual values, and maintenance costs. There is a huge intangible that feels very heavy goods focused, but actually is one of the most damaging real-world costs for fleet customers running light commercials as well. Downtime!

For those unfamiliar with the term, downtime is one of the most underestimated real world costs to a fleet. Vehicle downtime refers to the period when a vehicle is out of service and unavailable for use due to maintenance, repair, inspection, accident damage, or any other issue that prevents it from operating as intended.

If a vehicle isn’t running, nor is the engineer/delivery driver/technician etc… This creates some key questions for the decision maker of the fleet.

• ‘How much does the driver of the vehicle cost me when they’re out of action for a day?’

• ‘How much revenue do we lose as a business from having an engineer down?’

• ‘What is the reputational loss for cancelling/ postponing work to our clients?’

• ‘How quickly can I hire a replacement vehicle?’

In addition to these questions, the downtime questions are spread further with specialist vehicle usage for applications such as refrigeration, Welfare, Traffic management, and specialist fit out vans with complex additions such as compressors or tools necessary to do the job it was intended for. How far do the costs spiral, to when a replacement vehicle in this more niche product type, is concerned?

The struggle

The constant challenge of downtime often creates a push from fleet decision makers to look at different options of procurement and funding. This varies significantly depending on the decision makers own preference. We’ve listed below some of the options that fleet decision makers consider in attempts to mitigate the issue of downtime:

Product reliability

There is some truth in the phrase echoed by numerous ‘industry experts’ that there is no such thing as a bad van nowadays. That is absolutely true, but there are variances in the reliability and consistency of vehicles, particularly under pressure of challenging applications. My years of Mercedes-Benz sales were spent informing customers that the demanding sectors such as emergency services, food and couriers all relied on the Sprinter product above all else. Whilst a great sales pitch no doubt, this reputational giant in terms of quality is frequently replaced with more modest brands in terms of profile and perceived quality, such as Iveco Daily, Ford Transit, and Fiat Ducato as a final decision in the purchasing process.

So why then can these be a viable alternative to the national wide supported network of a brand like Mercedes-Benz or MAN? A lot of this is down to regional arrangements with a good local dealer and service to boot. Overall cost also makes a huge difference with up to £15k difference between a ‘decent’ budget van and the more premium alternative. Of course, a reliable nationwide network supported by a more premium manufacturer such as Mercedes-Benz of MAN gives more assurances on a national scale due to uptime commitments and off-road support, but sometimes the upfront cost savings cannot be overlooked.

Bolt on support and services

Full repair and maintenance (R&M) agreements with third party institutions such as Halfords and ATS, have helped decision makers to give some form of national assurances where the networks are less consistent or lacking. There is no escaping warranty commitments on this basis though, as these still must be facilitated through the dealer network of the OEM.  Fleet management options from support services such as Saphire Vehicle Services and Marshall Fleet Solutions or big FN50 lease companies, help customers to provide more ‘fleet clout’ with the fleet management company doing the chasing, the pursuing and often the hard graft to get the vehicle back on the road.

Passing on the downtime issue

A common option particularly in the most niche product offerings is the world of ‘Contract Hire’. This isn’t contract hire as we may know it with the bank based lending of the FN50 funders, but the supported all encompassing funding of rental companies such as Fraikin, Enterprise, and Petit Forestier, but to name a few. Where the vehicle is going to be highly expensive being off the road, the alternative to the premium selection is this option. It can also be appealing in conjunction with a premium brand. Often with a downtime reassurance of a vehicle replacement, the option is usually limited to contract hire as a product, but fully supported and guaranteed to do the job.

Go with the badge

It sounds obvious, but for fleets with a harder usage that just can’t afford that van to be off the road, going with a badge they have experience of with some form of assurances is the answer. This stops the restriction of funding method (as with the contract hire option), there is a premium for the product, but usually a residual value uplift. We refer again to the brand's of Mercedes-Benz and MAN on this one. There is a reason supermarkets and couriers use Sprinters, and it isn’t the price tag. Residual values also play a part, though the inconsistencies of these in recent years have dampened the benefits from this perspective.

Synopsis

So how can a decision maker know which option is right for them? It isn’t easy to work out as it entirely depends on the circumstances of the fleet and business structure. Application, vehicle usage, expected mileage, likely abuse of the vehicle, desired funding method of the business, and the cost of tools and the billable engineer/driver’s time for the work all must be considered. Any penalties for non-attendance or cost for downtime are also critical in this. For example, a company such as Petit Forestier have built up a national reputation as the first place to go for refrigerated vehicle contract hire simply due to the cost to businesses of the downtime in this sector. Despite damage recharges, excess mileage charges, and the costs of such a service, it still often works out easier to budget and less disruptive to businesses to ensure the support is there.

It isn’t always the case though that downtime is so expensive, so companies must steer carefully between a ‘nice to have’ option of a premium fleet product and what is necessary for their own business. I have met many a sophisticated fleet decision maker who bought 20x budget vans (we’ll assume a £10k saving per unit) and bought one extra to keep in the yard for emergencies/downtime issues. The saving over 20x vans of £200k long since paid for the extra asset. Even with residual values considered, this still was a more sensible decision.

So downtime in conclusion, is really about understanding your fleet or working with a business who can help you to steer the conversation to ensure its right for you. As a simple rule of thumb, the more expensive the conversion and the higher the cost to your business of the vehicle being off the road, mixed in with high mileage and more vehicle abuse, the more sensible it is to think premium and premium aftersales.

If you’re unsure though, contact Automotivate and we can arrange for a team member to meet with you, troubleshoot your fleet and work through the options available with you.