04 Sep Control Costs With A Flexible Business Fleet
Control Costs With A Flexible Business Fleet
Australian businesses are facing an unprecedented moment in history. Public health measures implemented in response to COVID-19 have put pressure on organisations in all sectors of the economy, forcing closures of retail precincts and impacting both national and international supply chains.
In this period, protecting your business’ cash flow should be your number one priority. To that end, many businesses are examining their expenses in a new light, taking a fresh look at where their money is being spent and working to make their business as efficient as possible. With income disrupted in many industries both directly at the consumer level and indirectly through upstream impact, smarter decision-makers are putting everything under the microscope.
One such area receiving renewed scrutiny is the corporate fleet. While previously always assumed as completely necessary – after all, your business needs to move people and product – the current crisis has forced a shift in thinking. A massive cost-centre with very little transparency, corporate fleets can be a major drain on revenue, costing a company hundreds of thousands a year in maintenance and administration. In an era where it is vital for your business to be as lean as possible, your fleet should be the next expense you and your team consider.
Why is my business fleet so expensive?
Business fleets are expensive to own and maintain because cars are expensive to own and maintain. All the costs you wear in the course of owning your own private vehicle – depreciation, administration, servicing, fuel – apply to each and every one of the vehicles in your fleet, adding up to a substantial cost to your business. Additionally, variable costs such as fuel and servicing can be higher for a fleet car compared to a similar private car, as fleet cars will often be used more often and for longer periods of time, increasing wear on the vehicle. That translates into more trips to the garage, more tyre changes, and an overall greater maintenance bill.
The inflexibility of a business fleet also attracts its own indirect costs. Vehicles are expensive assets that are hard to dispose of. Whether you have purchased the vehicle outright or access it on a lease or loan structure, freeing up capital locked into a fleet can be extremely difficult. While not a pressing issue every day, this inflexibility becomes an issue if business slows down or the market changes and you can no longer justify the expense of the vehicle. When your margins are your highest priority, you can’t afford to be paying the lease and running costs on a vehicle that’s not providing value to your business. This cuts deeper for businesses with seasonal or irregular demand – operators cannot easily and cost-effectively scale up their capacity without acquiring a new vehicle, creating additional risk during a downturn. With depreciation such a killer, expanding your fleet is a step your business would be wise to avoid as much as possible.
Finally, fleets create balance sheet issues regardless of how they’re held. Recent changes to accounting standards mean that even vehicles accessed via a lease must be recorded on the holding business’ balance sheet. Previously, leased vehicles could be left off a balance sheet, allowing businesses to reduce the amount of debt it reported, lowering their debt-to-equity ratio and potentially making them more attractive to lenders. With this change, a leased vehicle has an identical impact on your balance sheet as one you own, increasing the amount of reporting required and potentially affecting your ability to seek a loan.
What you can do about it
With leasing and owning a vehicle offering similar costs and liabilities, smarter businesses are looking at new access structures that allow them to preserve the benefits of ownership without the downsides. Many of them are turning to Carbar. Our car subscription service increases transparency while decreasing costs, helping you take control of your expenses in several ways. No more worrying about servicing schedules, no more shopping around for insurance or losing money to depreciation – we take all the mess out of running your fleet, condensing dozens of bills into a single weekly fee that gives you access to your entire fleet. Just pay for fuel. Crucially, car subscriptions do not need to be recorded on the balance sheet, giving you an advantage over your competitors when approaching investors.
With used car prices and demand for vehicles remaining strong despite the downturn, now is the perfect time to offload your fleet and embrace subscription. Businesses can even sell their cars directly to Carbar and turn that money directly into a new subscription.
Keep your business moving the flexible way with Carbar. To learn more about car subscription, browse our range of vehicles or join for free, visit carbar.com.au today.