Fuel is one of the biggest cost elements in the fleet budget, generally ranking second to depreciation, or the lease rentals. For a typical fleet car situation, the fuel for business mileage can be 15% - 20% of the total fleet cost. Fleets have faced significant increases in fuel costs, through a combination of higher prices for the raw material crude oil, and because of continuing escalation in UK taxation on road-fuels.
Given the global supply situation, with costs of crude oil constantly increasing, this situation is unlikely to improve. So it follows that exercising control over the fuel used, and the costs involved, is an essential part of the fleet management function.
Most company cars and vans have fuel used for business mileage paid for by the employer. About one-third of these also have private mileage paid for as well. So controlling the costs involved is just as important as any other aspect of fleet management.
A typical fleet car fuel cost calculation might look like this:
- Business mileage (fuel paid for) = 10,000 pa
- Expected consumption (diesel) = 45 mpg
- Typical pump price of fuel = 105 p per litre
On that basis, for its 10,000 annual business miles the vehicle will:
- Use 1,010 litres (222 gallons)
- Cost £1,061 (VAT inclusive)
- £903 (VAT exclusive)
These costs are likely to continue to increase significantly ahead of inflation over the coming years. Transport of all kinds is a major contributor to carbon dioxide (CO2) release into the atmosphere, and the UK government is committed to controlling this - through taxation. Most vehicle taxes are now based on, or have some component, relating to CO2 production. Unless there is some reasonable system now, the fleet manager will have no idea how much is being spent, and will be unable to predict or control fleet fuel costs in future. That can be dangerous, in any business cost situation.