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June 1, 2011updated 12 Apr 2017 4:14pm

Harnessing the revenue potential of grey fleets

Leasing providers can boost their revenues by helping clients reduce the cost of grey fleets, while also mitigating legal and environmental risks, according to experts. A grey fleet vehicle is one that is employee-owned and is used for work-related journeys The grey fleet in the UK estimated to range from onem to threem drivers has potential legal risks for companies.

By Nick Huber

Leasing providers can boost their revenues by helping clients reduce the cost of ‘grey fleets’, while also mitigating legal and environmental risks, according to experts.

A grey fleet vehicle is one that is employee-owned and is used for work-related journeys. The grey fleet in the UK – estimated to range from onem to threem drivers – has potential legal risks for companies.

This is because employers who pay staff extra for the cost of buying, running and insuring their own cars for business use have a ‘duty of care’ to employees.

Employers could therefore face legal action, or even criminal prosecution, if an employee using their own private car is involved in an accident and the vehicle has not been properly maintained, of if the driver does not have an up-to-date driving licence.

In the public sector alone, nearly 57% of work-related mileage is made by employees in privately-owned vehicles, according to the UK’s Office of Government Commerce.

Grey fleets can also be more expensive than company cars and can cause more pollution, unless they are managed carefully.

According to the Energy Saving Trust, the average privately-owned car used for business purposes is seven years old, while the average car in a company fleet is just two years-old and therefore usually fitted with more environmentally-friendly technology.

Arval, a contract hire and fuel-management company, helps clients review their grey car fleet by putting drivers into four categories: infrequent driver, low mileage; infrequent, high mileage; frequent, low mileage; and frequent, high mileage.

The company calculates the value of each driver to the company based on the cost of running the car, the ‘duty of care’ risk the driver poses, and the environmental impact of the journeys.

“We identify which are the cost-effective options for business use of cars,” said Mike Waters, director of market insight at Arval. “For example, an employee who uses their own car for business use infrequently but has a high mileage is probably better off getting into a rental car, which is insured, new and is properly maintained. Also, it probably costs less to run in terms of the mileage allowance payment rate to the employee.”

The savings employers can make by reviewing their grey fleet vary according to the number of vehicles and drivers’ mileage, but can be as much as £1m (€1.1m), Waters said.

Phil Peace, director of sales at Hitachi Capital Vehicle Solutions, said he works in partnership with his customers – providing them, for example, with clauses to insert into their policies to mitigate duty of care risk for grey fleet drivers.

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