SMALL businesses account for 4.7 million firms in the UK. However, they are more vulnerable during the downturn.
The number of UK businesses that are expected to fail in 2009 will increase to 36,000 (one in every 56 businesses). This is an increase of 59% says accountants and business advisors, BDO Stoy Hayward LLP.
Yet some new research from leasing company Arval shows that small businesses are not taking all the opportunities to reduce company car costs to weather the storm.
In comparison to larger companies they are not seeking expert support to manage company car costs.
Larger companies favour contract hire for funding their business cars. Smaller companies tend to purchase. This increases exposure to used price fluctuations.
The Corporate Vehicle Observatory (CVO) research for Arval shows smaller companies (10-99 employees) are also less likely to have a written company car policy:
- 33% have no company car policy
- 48% have no criteria for vehicle selection
- 90% of larger companies have both policies in place
Smaller companies also retain their business cars longer – an average of five years. This compares to three years for large companies. From a cost point of view there is an optimum time to swap vehicles, says Arval. Without fleet management expertise smaller companies struggle to identify this.
Arval believes this lack of advice makes smaller companies worse placed to deal with the tough economic environment. Only 10% of small companies have changed company car policy due to the economic conditions; 25% of larger companies have.
Mike Waters, director – market insight at Arval commented: “While smaller companies are most at risk during an economic downturn and so gain the most benefit from reducing business car costs, this research shows that they are getting the least support because they are not seeking advice from leasing providers.”
He added: “Business car management is complex. But it also provides great opportunity for cost savings, crucial for businesses in the current conditions. If smaller companies were seeking advice from fleet management experts they could benefit from long-term cost savings as well as meeting environmental and health and safety obligations.”
Arval report findings
Small business car financing
- Self purchase 55%
- Financial leasing 30%
- Car credit 15%
- Contract hire 1%
Company car replacement timescales
- Less than 10 employees 59 months
- 10-99 employees 43 months
- 100-999 employees 41 months
- 1,000+ employees 36 months
Company car written policies dictating duties of driver
- 10-99 employees 67%
- 100-999 employees 52%
- 1000+ employees 96%
Written policy for allocating company cars
- 10-99 employees 52%
- 100-999 employees 89%
- 1000+ employees 96%
Going green: introducing fuel-efficient vehicles
- 1-10 employees 21%
- 10-99 employees 18%
- Green vehicles defined as fuel efficient labels, LPG or natural gas, biofuel, electric or hybrid
Further information
For additional comment on this important Arval research, read the Editor’s Blog New Arval report on small firms and company cars
We have plenty of advice to help you make better business car decisions. Have a look at some of these articles:
Failure to embrace best practice leaves firms vulnerable
