Fleet Jargon Explained Part 4 Fleet Jargon Explained Part 4
Finance lease - The simplest form of lease which is only concerned with funding the chosen vehicle. Usually involves writing the car off over the period of contract (2-5 years) with the lessee doing most of the work, eg finding the car, negotiating discounts, maintenance, residual value, etc. Disposal proceeds go to lessor because he is the owner: usually then rebated (95-100%) to lessee as a "rebate of rentals". Rentals are classed as revenue expenditure, not capital, and attract VAT. Most rentals are paid monthly or quarterly. Since the lessee carries the actual risk and cost of depreciation as if it is owned, this type of lease is in fact treated (for the purpose of financial reporting) as if it were hire purchase.
Fleet management services - A range of technical support functions available from a specialist supplier - can include any of the cost areas such as purchasing, disposal, maintenance arrangements, funding, fuel monitoring, reporting etc. Usually available from lessors (because of similarities) but client carries all risks and costs. Fleet management company charges an agreed fee (usually per vehicle per month) to cover their Administration.
Fleet management software - There are many suppliers of specialist software packages that, once primed with your fleet's vehicle data, can be used proactively to monitor and manage your fleet and its costs. Many smaller fleets may merely use a standard spreadsheet application, which in many instances is perfectly adequate. Specialist software systems are especially beneficial when dealing with a high level of small transactions from different driver/ cars, such as fuel and maintenance costs. The most important aspects of running a computerised system is what you want to get out of it; and therefore what accurate data you need to collect as input.
Fuel cards - Fundamentally a corporate credit card that is specifically for buying fuel. Its main advantages are the provision of a simplified central billing system, and also management reports can be supplied providing information on fuel purchases (where, when, how much and who by), vehicle's fuel economy, fuel pricing etc. Also cards can be restricted to only cover certain forecourt purchases ie diesel OR petrol, oil, screen wash, and exclude all other purchases.
Funding - Anything to do with providing the money to acquire fleet cars. Can include bank overdraft, hire purchase, conditional sale, block discounts, lease or contract hire. The choice of method or even mixture of methods depends on the needs of the user - overall cost, cash flow. Taxation (corporate and VAT), balance sheet and risk elements are all factors to be considered. Some care needed to ensure that effective interest rates are not excessive.