Posted by Mary Tinsley on Fri, Jan 27, 2017 @ 01:59 PM

Hire or buy? 3 things to consider about commercial vehicle hire in uncertain times

Is commercial vehicle hire or buying best 3 things to consider in uncertain times.jpg

The events of last year have left many businesses reeling, with some questioning how the UK is going to fare in the wake of Brexit and the combined force of the US election.

The  news was met with pessimism by the sector, with 64% of those polled by Freight Transport Association concerned about the short-term effects and the same figure in a poll by Fleet News believed that industry costs would rise following Brexit.

Opinion may be divided on the matter of Brexit, but that is not the only issue of uncertainty facing those in road haulage. Fleet owners and operators are being met with increasingly stringent emission standards, which most commentators feel is unlikely to be affected too much by Brexit. Added to this, vehicle safety standards are changing too: the Safer Lorry Scheme’s mirror requirements (that only came into force on 1 September 2015) are now deemed inferior compared with the low entry cab models which will receive the highest ratings under the new Direct Vision Standard (currently in consultation mode).

With all of these issues of uncertainty, the question then becomes: hire or buy? Here we take a look at three key issues you need to consider when deciding whether to buy your fleet or opt for commercial vehicle hire instead.

Capital and cash flow

How much capital do you have available and if it is locked up in buying a new fleet, how will that affect your cash flow? With the uncertainty surrounding trade and the weaker pound, most agree that -  in the short-term at least - the cost of new vehicles is set to rise.

If your business has unused or spare capital then you could invest this into your fleet without paying interest and you may be able to claim back a write-down allowance. However, bear in mind that whereas this can be up to 100% in the case of electric vehicles, it can be as little as 10% per annum for vehicles with CO2 emissions above 160g/km. You should also consider whether vehicle investment is the best use of your capital and whether you will have sufficient cash flow left.

Whereas second-hand used vehicles may have once reduced your capital outlay, be aware of the changing vehicle requirements for safety and emissions - the cost of modifications is always higher and some may be extensive (if even possible), such as low entry cab HGVs.

Ongoing maintenance and repair costs: is commercial vehicle hire an easier option?

If you choose to purchase your vehicles, you will be burdened with the responsibility for servicing, maintenance and repair. However, if you opt for commercial vehicle hire then your provider should deal with all of this for you – and some can even provide you with a replacement vehicle within the hour. Factors which may affect your decision to hire or buy include:

Sector: Certain sectors, such as construction, place a greater strain on the vehicles and so will require regular, proactive maintenance to keep overall servicing and repair costs low.

In-house capabilities: Larger rental companies may have an in-house maintenance team, which can keep maintenance costs low (so long as that team can easily access the vehicles if they operate on a national basis).

Specialist parts: High spec vehicles can often face longer waits for replacement parts. Large commercial vehicle hire companies are often at the front of the queue when it comes to servicing and parts demands, due to the high volume of business they provide.

Adaptability to seasonal demands, changing regulations and technology: If your business has a steady stream of business with similar vehicle requirements then you should be able to plan your vehicle needs in advance. However, for companies operating in sectors with highly fluctuating seasonal demand or where the business plans to expand quickly, your need for vehicles will not remain constant - meaning you will either have vehicles sitting idle, or you will have to buy or rent more to meet spikes in demand.

Another area where all businesses need to stay adaptable relates to technology. As mentioned above, there are changing legislation requirements for vehicle safety and emissions. If you purchase vehicles, it makes business sense to keep them for 5 to 7 years. However, during this time technologies are constantly changing, meaning that your fleet may face penalties - or miss out on incentives - if their specifications do not make the grade.

Legislation aside, technology is developing in other areas too that can help businesses become much more efficient. Make sure that you carefully consider all of the available options and how easy - and affordable - they are to add or retrofit to your vehicles, as this may influence your overall decision on whether it is best to opt for commercial vehicle hire or purchasing your own fleet vehicles.

These are just some of the issues that fleet managers and owners should consider. For more pros and cons and greater detail on the issues raised above, read our guide 'LCV Acquisition: Hire or Buy? Choosing the right vehicle option for your  company'

LCV acqusition - hire or buy


Topics: Fleet management