Commercial vehicles can drive success. Claire Cameron looks at why firms should upgrade and whether it is best to buy or rent a new fleet. With expert advice from David Brennan, CEO of Nexus Vehicle Rental, Dominic Reid of Northgate Vehicle Hire, Gareth Jones of Dawsonrentals Vans and light commercial vehicle industry consultant Tim Cattlin.
WITH the number of construction start-ups rising by almost a quarter in the first three months of 2016 and the Construction Products Association predicting a 3.6 per cent rise in construction work this year, it is perhaps no surprise the commercial van market is also booming.
According to the Society of Motor Manufacturers and Traders (SMMT), almost 28,000 new vans hit UK roads in April, making it the third consecutive month of growth.
Large vans continue to drive the market with 3.3 per cent more light commercial vehicles (LCVs) registered in the UK compared with the first four months of 2015.
Heavier vans also rose in popularity, with registrations for the 2.5-3.5T sector up 22.6 per cent and pick-ups also increased by 35.4 per cent in April.
With almost 40,000 new LCV registrations in the first quarter of the year, Ford is in the driving seat when it comes to best sellers. The manufacturer recorded almost double the number of LCV registrations compared to its nearest rivals Volkswagen in April with 8,219.
Strong van sales drove the light commercial vehicles market to an all-time high in 2015 and “the LCV market has traditionally been a pretty accurate barometer of the economic well-being of UK PLC,” says light commercial vehicle industry consultant Tim Cattlin.
“The current health of both these entities once again reflects this.”
Sales in the used market also remain strong with vans requiring little preparation and having the right specifications highly sought after.
“This is naturally keeping prices relatively high whilst demand remains stimulated from the SME sector,” says Cattlin.
However, with the record number of new vans registered in the past three to four years starting to hit the auctions, Cattlin expects prices in the used market to fall.
“The laws of supply and demand would suggest that the retail buyer will be the winner here with prices softening substantially,” he says.
But why should construction firms upgrade their fleet and is it best to buy or rent?
THE TROUBLE WITH OLD VANS
Commercial vehicles remain an essential part of a construction company’s plant and machinery inventory and in a deadline-driven industry, running an ageing fleet can prove problematic.
Research by the RAC estimates £500 is lost every day a vehicle is out of service, therefore keeping vans and HGVs in a roadworthy condition is essential.
According to the Driver and Vehicle Standards Agency (DVSA), 49 per cent of class seven vans (3-3.5 tonnes gross vehicle weight) failed their first-time MOT tests in 2014/15 with the main problems cited as lighting and signalling, brakes, suspension and driver’s view of the road.
“Aging vehicles tend to be less reliable and their upkeep can carry significant cost,” says David Brennan, CEO of leading corporate vehicle rental provider, Nexus Vehicle Rental.
“Construction is a unique and highly diverse sector, encompassing public and private housing, industrial and commercial projects and major infrastructure.
“Vehicles are often subject to demanding environments and heavy workloads, so keeping them running is vital in an industry where downtime is the fleet manager’s worst nightmare.”
Dominic Reid, business development manager at Northgate Vehicle Hire agrees and says firm’s run the risk of tarnishing their reputation by not replacing old vehicles.
“Reliability, performance and appearance can all suffer over time, with a big potential impact on cost, customer service and brand image.”
The obvious solution, Reid says, “is to dispose of old vehicles in favour of a new van, but for many companies, whether they have a vehicle on contract hire or purchased outright, the time, hassle, cost and contractual limitations involved with disposal will often prevent them from doing so.”
THE ADVANTAGES OF NEWER VEHICLES
Increased security and access to the newest technologies are the main advantages of running a fleet of new vehicles, while “fuel efficiency is one of the key cost-saving aspects which can make a major difference when applied across multiple vehicles that each travel thousands of miles a year,” says Reid.
“Telematics is now central to the operations of many businesses that run a fleet of vehicles, delivering management information that supports customer service improvement and reductions in vehicle running costs – not to mention duty of care and driver safety to name just a few.
“The benefits of driving new vehicles even extend to staff retention, giving employees a more pleasant working environment and even perks such as Bluetooth or a satnav.”
But with a diverse make-up of vehicles ranging from LCVs to HGVs and specialist equipment, buying, taxing, insuring and maintaining commercial vehicles can prove “an expensive outgoing and rapid depreciation is common,” says Brennan.
THE ADVANTAGES OF RENTAL
Alternatives to buying vehicles outright include flexible, long-term and daily hire which give firm’s access to the latest vehicles with maintenance and breakdown cover included. Less money is required upfront and companies can easily upgrade to new technology.
Research from the University of Buckingham’s Centre for Automotive Management has revealed LCV rental is a key factor in the recovering economy, explains Brennan.
“This is down to the ability to provide a totally flexible vehicle solution,” he says.
“Rented vehicles are newer, better maintained and more reliable than older fleet vehicles. They can be used only when they are needed. In addition, stringent SLAs such as those offered by Nexus mean there is a guarantee of legally compliant vehicles and a consistently high standard.”
According to Brennan: “Specialist features and modifications such as tail lifts, tow bars, racking, chevrons and beacons, and lighting can be catered for,” and this is why more companies are attracted to the benefits of daily rental.
Northgate has a network of 50 wholly-owned and warranty approved workshops and Reid explains flexible long-term hire “provides a complete solution because servicing, maintenance and breakdowns are managed by the hire company.”
He says: “Downtime can be minimised by proactive scheduling of maintenance events at a branch and workshop most convenient.
“Customers do not run the risk of lost income through downtime like they do with contract hire or buying vans outright, nor do they have to worry about additional costs like tyres, MOT repairs, breakdown cover and replacement vehicle – and all for a fixed monthly fee that makes budgeting easy and predictable.”
GETTING THE RIGHT RENTAL PRICE
While the availability and quality of a vehicle is arguably more important than price, “the tendering process that is central to many projects means cost is often a deciding factor in a job,” says Brennan.
“Daily rental is an effective way of keeping fleet costs lean. However price over quality isn’t always the answer as cheaper rental packages can sometimes mean inferior vehicles and reduced reliability.”
Gareth Jones, managing director at Dawsonrentals Vans explains the rental industry’s job is to adapt to the purposes of any individual business.
“No matter who the customer is, the contract will be won based on how effectively you can adapt your product to meet their specific needs,” he says and managing security and efficiency through technology is key.
“We’re looking at these objectives and responding with further investment in advanced telematics, as our new monitoring systems continue to report remarkable reductions in engine idling, speeding and wear and tear on the job.
“To complement this focus on minimising the decline of a vehicle when in use, sensible vehicle providers also increasingly operate a more trusting service. This means a reduction in end of use charges and more savvy investment in damage limitation tools.”
Plant theft, which costs the construction industry more than £800 million each year, is another reason for choosing rentals.
“The replacement of owned vehicles after a theft can be a long, laborious, expensive process for companies,” says Brennan.
“Because rental vehicles are usually newer, they are equipped with state-of-the-art security features, reducing the likelihood of theft. And should the worst happen, providers are able to source a replacement quickly.”
Given the diverse nature of the industry and fluctuating vehicle requirements, Brennan believes rental can play a key role in the successful delivery of construction business strategy.
“It not only offers companies an economical, affordable alternative to buying, it minimises waste, offers complete flexibility, reliability and security, and allows companies to flex their existing fleet in line with their needs,” he says.
MAXIMISING FUEL EFFICIENCY AND PROFITABILITY
Peter Tillotson, business development manager of tyre pressure monitoring specialist, TyrePal, explains how managing tyre pressure is key to keeping commercial vehicles on the road
Thirty-three per cent of a fully-loaded heavy goods vehicle’s fuel usage can be traced back to overcoming the rolling resistance of tyres.
This percentage is even higher if tyres are under-inflated. If a vehicle’s tyres are under-inflated by 15 pounds per square inch (PSI), it can lead to six per cent greater fuel consumption and a cost increase of £150 every year, on a fuel spend of £2,500 per year.
Under and over-inflation puts excessive strain on tyre sidewalls, causing them to overheat, collapse and cause a blowout.
By implementing a tyre pressure monitoring system (TPMS) like TyrePal into vehicles, managers can reduce fuel usage, breakdowns and ensure driver and road safety because drivers receive an early dashboard warning that tyre pressure is decreasing.
WHAT SHOULD YOU ASK A RENTAL PROVIDER?
David Brennan, CEO of Nexus Vehicle Rental, gives his advice
Fleet managers are beginning to realise that the daily rate is not the primary consideration when choosing a rental provider.
Seemingly attractive rates may be offered to secure new business, however, what could follow is poor service, inaccurate invoicing, issues around damages and fuel, and incorrect information that could put your Motor Insurance Database (MID) insurance in jeopardy.
As Nexus doesn’t own the vehicles it can focus on delivering a more consultative approach based on real-time information, advising its clients on how to increase efficiency and reduce costs.
To ensure they are getting the best deal, fleet managers should ask more searching questions of their rental provider.
Here are the questions you should ask a daily rental provider when looking to book construction vehicles:
1, Sourcing a car or a standard van is simple – what isn’t as straightforward is getting a supplier to provide specialist vehicles, such as 4x4s with tow bars or flatbed tippers with beacons, quickly and efficiently. How can you help me with this need?
2, I’m increasingly being asked to provide more in-depth management information (MI) to my stakeholders, what MI can you provide and can I have a bespoke report if needed?
3, How will you increase customer service while ensuring that the associated costs of rental, such as damage, fuel and invoice inaccuracies are minimised?
4, With vehicle bookers based across multiple sites, how do you ensure that we manage all vehicle hire requests in accordance with our internal fleet policy?
CASE STUDY: NEXUS VEHICLE RENTAL GEARED FOR RENT
Carillion uses Nexus Vehicle Rental for managed partner support and short ad hoc rental requirements.
A leading UK support services company with extensive construction capabilities, it has some 750 vehicles on the road at any given time. Nexus manages all of these on behalf of Carillion, whether they are Nexus rentals or those of other providers, through its unique IRIS software management system.
The company must routinely react very quickly to short-notice demands, such as urgent construction jobs, where cars and vans with appropriate kit and safety gear are suddenly needed at site locations.
Nexus administers vehicle supply to Carillion departments, customers and partners.
This includes placing the booking, supervising it throughout the contract, and reconciling any varied instructions such as changed return point, extensions or early returns.
Carillion frequently handles traffic management on its build, roads, and infrastructure projects and needs vehicles to be specially marked, very well equipped with various specialist tools, electronic parts, beacons and tow bars. Mess vans, with sleeping, washing and cooking facilities are also often required.
Nexus delivers all of these, controlling and querying costs of all providers to keep outlay down to a minimum and keenly interrogating fuel and damage expenses claims. Nexus also ensures all vehicle and driver compliances, due diligence and health & safety demands are met, which is vital to safeguarding operations and reputations.
Carillion fleet operations manager, Chris Brown, said: “The Carillion IRIS system sorts each rental out in seconds, controlling costs and giving us high level management information that allows us to monitor the performance of all rental suppliers and our drivers. It integrates perfectly with our own fleet database.
“Everything about the Nexus offering is geared to the highest standards, most comprehensive services, fastest speeds and optimum ease at the lowest costs. We greatly value its depth of experience and strength of its intelligent IT that allows us to best serve our customers.”