BVRLA News, August 2010

BVRLA News

www.bvrla.co.uk August 2010

The newsletter of the British Vehicle Rental and Leasing Association

Leased fleets’ VAT bill is out of touch with reality Leased fleets are overpaying hundreds of millions of pounds in VAT, according to new business mileage data compiled by the BVRLA. Businesses leasing cars can currently recover 50% of the VAT portion of the finance element of their rental payments. This percentage is based on the assumed average level of private use for business vehicles.

However, mileage figures assembled by the BVRLA following a request by HM Revenue & Customs (HMRC) clearly show that the current recovery rate is now out of date.

Data from more than 120,000 drivers, covering nearly 2.5 billion annual miles, shows that business usage accounts for around 70% of the distance travelled (excluding commuting). The data also proves that this business-private ratio has existed for at least three years – apparently showing the success of the previous government’s policy of taxing low business mileage users into cash-for-car or employee car ownership schemes, and company car drivers out of using company-provided fuel.

The BVRLA has therefore called for the 50% VAT-recovery rate for businesses leasing cars to rise to a level that more accurately

reflects current mileage. It also refuted the HMRC’s claim that 50% is a “simple figure” that “businesses are familiar with”.

The UK’s VAT treatment of leased cars has to be approved by the European Commission every three years. With this approval expiring at the end of the year, there is an opportunity for HMRC to seek an improved rate – instead it has said it will ask the Commission to approve the current level.

“HMRC has chosen to ignore the very robust data we provided in favour of a much smaller sample of 418 drivers, based on an anecdotal survey conducted by the Department for Transport, which conveniently backs its own position,” said BVRLA chief executive John Lewis.

“Before we were asked to contribute to HMRC’s research on this issue we would probably have been happy to stick with the status quo, but, on the basis of the new and very robust data, doing nothing is now not an option.”

Lewis added: “There is nothing we can do to prevent VAT rising to 20% in January, but we will do our utmost to ensure that leasing customers are treated fairly when it comes to paying it.” n

VAT recovery: the missing millions The BVRLA estimate for the amount of money that could be overpaid by UK businesses leasing cars is based on the following calculation: Average annual cost of car lease (finance element) = £4,800

Potential VAT overpayment (per vehicle, per year)

=

£192

Annual VAT charge (at 20%) =

£960

50% recovery

=

£480

Approximate size of UK contract hire fleet (million vehicles) =

1.5

70% recovery

=

£672

Potential total overpayment

by UK businesses (per year) = £288m

bvrla.co.uk

In this issue BAA agrees to promote car rental Airport authorities are recognising the advantages rental offers page 2 DVLA gives V5C a ‘£310m makeover’ The vehicle registration document is redesigned in an attempt to reduce sales of stolen vehicles page 3 Q&A: Electric vehicles Catherine Hutt of the SMMT faces some electrifying questions page 4 RVR: valuable insight July’s Residual Value and Remarketing Forum tackled forecasting, used van prices and electric vehicles. Catch up here! page 5 Leaseurope sets out ways to tackle fraud The European body reports on the industry’s efforts to combat fraud page 6 Survey values drop The BVRLA’s ongoing survey of predicted residual values shows a dramatic fall for the ‘basket’ of cars it tracks page 7

— Promoting responsible road transport since 1967 —

Comment BAA agrees to promote car rental at Heathrow Together with the emergency Budget measures, October’s spending review is set to have a huge impact on all areas of business, both private and public sector.

That is why the theme of this year’s BVRLA Industry Conference is “Sustainable transport in an age of austerity”. It is the place to be if you want to know where the economy is going, what is happening to road transport and what we will be driving.

But it is not all about strategic soothsaying. The event will help delegates stay abreast of operational issues, from residual values and regulation to commercial vehicles and manufacturer strategies. You can find more details in the advert on page 6.

Editor Toby Poston, toby@bvrla.co.uk 01494 545700 Production Manager Steven Prizeman, steven@bvrla.co.uk 01494 545710 Advertising Nora Leggett, nora@bvrla.co.uk 01494 545713 © Copyright BVRLA 2010 BVRLA News articles may be used copyright free by members provided that an acknowledgement is given.

BVRLA River Lodge, Badminton Court Amersham Buckinghamshire HP7 0DD T 01494 434747 F 01494 434499 E info@bvrla.co.uk W bvrla.co.uk Honorary Life President Freddie Aldous Chairman Kevin McNally Vice Chairman Neil Cunningham Honorary Treasurer Brian Back Chief Executive John Lewis

The BVRLA’s campaign to ensure that car rental is promoted by airport authorities as the preferred mode of road transport for airline passengers is gathering momentum.

Airport operator BAA, whose responsibilities include Heathrow and Stansted, has agreed to do more to promote car rental as a cost-effective mode of transport for airline passengers.

It wants a greater share of travellers’ journeys to and from airports to be made in hire cars, rather than the minicabs or private cars of family and friends that currently account for 41% of their journeys to and from airports.

BAA set out its position in a meeting with the BVRLA at the airport operator’s Heathrow head office in July.

With the government deciding not to proceed with a third runway at Heathrow, BAA is looking to find other ways to improve airport efficiency. Increased car rentals from airport-based operators would also bring in extra revenue.

With concern about the pollution caused by air travel growing, BAA is keen to reduce airport-related road transport emissions. The BVRLA estimates that the use of rental cars instead of private cars and minicabs would cut

the emissions attributable to airline passengers’ journeys to and from airports by more than half.

But with rental cars being used by just 3% of airline passengers, the BVRLA and BAA are considering ways to promote them. Providing better information on car rental, and creating a seamless journey to, through, and from the airport are under consideration.

BVRLA members have also been working with other airport operators.

At Manchester Airport they have been conducting a survey of customers who did not pre-book a rental car.

The results show that convenience and price were the key reasons for renting a vehicle and that most of these ‘walk-up’ customers either thought that booking on the day would be cheaper or made their travel arrangements at the last minute.

About a third of respondents to the survey said they were influenced in their choice of car hire firm by signage at the airport.

The BVRLA will now be providing this feedback to the Manchester Airport Group and discussing what changes can be made to help raise awareness of car rental among airline passengers. n

MasterCard says: ‘The future is flat’ MasterCard has introduced flat credit cards lacking the familiar embossed text. The card scheme wants to spread the word about the new designs to the car rental sector because some companies have rejected unfamiliar cards.

Essential details, such as name, account number and validity dates remain the same – only in flat text rather than raised.

As MasterCard has a variety of cards for its different markets, a chip may or may not be present and the company’s globe hologram may appear on either the front or the back of the card.

The procedure for processing the card remains the same. However, in face-toface transactions, staff who enter the cardholder account number into their point-of-sale system for authorisation should be aware that they could become liable for certain chargebacks by not being able to prove the presence of the card.

BVRLA members with queries about the new-style cards should contact legal services executive Amanda Brandon. n Contact Amanda Brandon, amanda@bvrla.co.uk 01494 545701 BVRLA News | August 2010

V5C gets ‘£310m makeover’ to fight crime The Driver and Vehicle Licensing Agency (DVLA) has redesigned the vehicle registration document (V5C) in an attempt to reduce sales of stolen vehicles.

The certificate – sometimes called a ‘logbook’ – is issued whenever a vehicle is registered with the DVLA. A restyled certificate (red, to distinguish it from the current blue) will be sent to all newly registered vehicles from 15 August and all relicensed vehicles, or those subject to a statutory off-road notification (SORN), after July 2011.

Although the V5C is not proof of ownership – and the redesigned certificate states this clearly – the DVLA says the move will help protect motorists from being sold vehicles with false documentation.

VOSA explores online access to HGV test data Online access to HGV annual test data is nearly here. A system set up by the Vehicle and Operator Services Agency (VOSA) has already been piloted by one of the BVRLA’s major commercial vehicle rental members.

The project involved the company uploading a list of its vehicles to a website each month. Within 24 to 48 hours it was able to see their test results.

There were some teething problems – specifically, the company was unable to access test data for vehicles it had sold.

The next step in the project is for VOSA and the BVRLA to work on suitable data protection wording to enable members’ customers to consent for test data to be accessed.

VOSA wants to ensure that it is not overwhelmed by long lists of vehicles. One solution could be for the BVRLA to collate requests and submit them to VOSA on a monthly basis on behalf of its members. n BVRLA News | August 2010

The BVRLA expressed surprise with the DVLA’s decision to reissue the V5C, especially at a time when government expenditure is being monitored so closely. With approximately 31 million genuine V5Cs in circulation, and an estimated production and distribution cost for each new certificate of around £10, the BVRLA believes the de facto recall of old V5Cs will cost the DVLA £310m.

The association also objects to the administrative burden on its members of retrieving and destroying old V5Cs and filing new ones, given that it believes this will provide no real benefit.

The BVRLA will be meeting with the DVLA to discuss the position of fleets.

It will suggest that fleets be exempted from the measure until their vehicles are disposed of.

In a separate move to protect the integrity of the vehicle keeper register, the DVLA has announced that it must be notified of errors in a vehicle keeper’s name within six weeks of registration. Subsequent alterations will be treated as a change of keeper, thereby increasing the number of former keepers. The time limit will not apply to other changes to the V5C. The DVLA has told the BVRLA that it received positive feedback from the letter it sent to dealers recently to highlight the importance of accuracy at first registration (see BVRLA News, May 2010).

A number of dealers and manufacturers have contacted the DVLA with questions about the fleet registration process and to make suggestions for improving the way in which changes to the fleet list, which contains fleet codes and addresses, are communicated to dealerships. n

Rental sector ‘shouldn’t pay congestion charge’ Rental vehicles in London should get a 100% discount from the capital’s congestion charge.

So says the BVRLA in its response to Transport for London’s (TfL’s) latest consultation on the scheme.

Congestion: 100% discount?

“Rental and car club vehicles are part of the integrated transport solution,” said Jay Parmar, the BVRLA’s head of legal services.

“Research has shown that one rental or car club vehicle can take up to 11 private cars off the road – and these vehicles are driven 68% fewer miles than a privately owned vehicle. Given that these vehicles are doing very little to increase congestion in London they should benefit from a 100% discount from the scheme.”

Rental and car club vehicles are also the newest and cleanest vehicles, with

the average CO2 emissions of these vehicles being 147g/km, compared with 175g/km for the average privately owned car in London.

The BVRLA says they therefore play a vital role in helping the mayor of London meet his air quality targets.

In its response to the consultation, the BVRLA also called on TfL to fulfil its previous commitment to deliver a fleet scheme which would alert participating rental and leasing companies to unpaid charges for any of their vehicles driven inside the congestion zone. Such a scheme would reduce the administrative burden for both rental and leasing companies and TfL. n The BVRLA’s full response to the TfL consultation can be found on the association’s website. www.bvrla.co.uk

Q&A : Electric vehicles With electric vehicles featuring high on rental and leasing firms’ agendas, there still appear to be more questions than answers on how an electric vehicle will fit into the fleet.

We asked Catherine Hutt of the Society of Motor Manufacturers and Traders to address some of the main ones.

Is the industry training enough technicians to cope with electric vehicle (EV) repairs and servicing?

The Society of Motor Manufacturers and Traders (SMMT) is working with the Institute of the Motor Industry (IMI) and the Sector Skills Council for Science, Engineering and Manufacturing Technologies (Semta) to establish a uniform and scalable approach to training for electric vehicles.

Many good training schemes already exist, the SMMT simply aims to combine current UK expertise and ensure the training can be rolled out on a national scale, in line with increasing numbers of EVs on the road.

Crucially, the SMMT training project targets manufacturing staff, dealers and technicians, as well as emergency services and breakdown recovery services, which will ensure all personnel handling EVs will be trained appropriately and to an industry-wide standard.

Are EVs suited to any particular type of businesses?

Electric commercial vehicles have been on the market for many years, particularly thanks to the back-tobase nature of many fleets. Tesco, Sainsbury’s, UPS and FedEx are a few examples of companies which have used EVs for a number of years.

EVs can significantly reduce emissions from any fleet, which may be of particular 1 Source: UK National Travel Survey 2 Source: UK Office for National Statistics

importance to environmentally conscious companies.

Is the government doing enough to encourage take-up of low-carbon vehicles?

Governments around the world are supporting the shift to low-carbon transport solutions and the UK is leading the way in a number of areas.

The introduction of the Plug-In Car Grant is hugely significant as it helps ensure the UK’s international competitiveness [see box]. This market incentive, designed to reduce the purchase price, makes the UK an attractive market, meaning the UK is well placed to lead the EV industry. The recent announcement is a clear signal that the new government understands the importance of this opportunity and supports the industry.

What are manufacturers doing to alleviate range anxiety?

Just as with a regular vehicle, owners need to become accustomed to its range capabilities. The average single journey length in the UK is 8.6 miles1 and the average total daily distance travelled is 25 miles2 – a distance which all pure EVs can comfortably achieve.

As many EVs are capable of more than 100 miles, manufacturers are explaining that EVs can be the ideal solution for the vast majority of journeys.

Manufacturers also take every precaution to inform the driver of the available charge remaining in the battery.

As with internal combustion engine (ICE)

vehicles, a ‘fuel’ gauge indicates how much charge is left in the battery.

If the driver continues without recharging, the consequence will be the same as running out of fuel and recovery services will assist motorists to reach their destinations and recharge their battery.

Do the manufacturers have any estimates on servicing costs for an EV? There are very few moving parts in an EV, which should reduce servicing costs and downtime. When the EV does require servicing it will be similar to an ICE service because although the powertrain is different, many of the service actions for EVs, such as brake tests, are similar to ICEs. Do manufacturers have any idea of the second-hand market for EVs? The second-hand market for EVs offers a number of opportunities. For example, a battery which is considered to be ‘end of life’ (ie still capable of delivering 80% of its original capacity) may be ideal for a customer who only travels short distances and would rather pay slightly less for a second-hand battery which meets their transport needs.

In addition to this, opportunities lie beyond automotive use as batteries could be used for energy storage for their second or third life. n Catherine Hutt is business development manager (electric vehicles) at the Society of Motor Manufacturers and Traders. She was a speaker at the BVRLA’s Residual Value and Remarketing Forum in July.

The Plug-In Car Grant ❱ Given the go-ahead by Transport Secretary Philip Hammond last month, the scheme will come into effect from January 2011 ❱

£43m is being made available until 31 March 2012 for purchasers of electric cars and plug-in-hybrids emitting less than 80g/km of CO2.

The final budget beyond 2011/12 will be confirmed at the government’s autumn spending review.

❱ Buyers of eligible vehicles in the UK can get a grant of 25% of the purchase cost, capped at £5,000.

BVRLA News | August 2010

RVR : key issues on value The recent BVRLA Residual Value and Remarketing (RVR) Forum addressed vehicle forecasting, used van prices and electric vehicles. If you couldn’t make it, here’s a little of what you missed…

Care with forecasting can reap great rewards Leasing companies could boost profitability by up to 15% by paying more attention to the way they forecast vehicle residual values, attendees at July’s RVR Forum in Stratford-upon-Avon were told.

According to Denis Keenan, managing director of KeeResources, which produces forecasting and accounting systems, 90% of residual value losses are driven by poor setting of residual values on just 15% of a car fleet.

Van prices set to fall despite declining supply Average used van prices are set to fall in the months ahead as a result of fleets choosing to run vehicles for longer.

Experts from CAP and Manheim both agreed that prices were set to fall to more sustainable levels over the next six to eight months in a used market that will be categorised by both low demand and low supply.

“There is a definite impact from more vans having their contracts extended,” said John Watts, project delivery manager for CAP Red Book. “We are expecting fewer three year-old vans and more vehicles that are 42 months and older.”

James Davis, Manheim’s general manager of commercial vehicles, said there was currently a lot of duplicate stock because utility and rental firms are replacing fleets.

“Buyers are cherry-picking, focusing on their cash flow and being very wary of vans that require any work,” he said. n BVRLA News | August 2010

Keenan highlighted regression modelling, ‘follow-my-leader’ pricing and the failure to take model years into account as three of the most common mistakes. Making all three at once can knock more than 11% off a typical residual value margin, he said.

Manufacturer strategies were also making it increasingly difficult to forecast used prices, said Keenan. In particular, there was an ever-increasing list of model ranges and vehicle trims to contend

with. At the same time, model lifecycles were shrinking, with ‘honeymoon periods’ becoming ever shorter.

“The time companies spend on forecasting has diminished,” said Keenan.

“Not enough hours are going into it and people are only reviewing the top manufacturers regularly. It has got to the stage where some leasing companies don’t even realise that their best customer is losing them money.” n

Denis Keenan’s top tips for successful forecasting 1 2

3 4 5 6

Make sure you set the correct residual from day one.

It is worth reviewing secondary manufacturers like Hyundai – they can generate good returns.

When reviewing vehicles, take account of model year and any spec changes.

Don’t sample data, gather it and analyse every single bit.

Don’t let your book be driven by other people’s surveys and forecasts.

Drive your own fleet demographic.

Warranties are key to electric cars Most leasing fleets will expect any electric vehicle they put on fleet to come with a battery warranty of at least seven years, according to Martin Ward, manufacturer relationship manager at CAP.

Ward said that CAP was still grappling with residual values for electric vehicles.

He added that his company would not set any values for Renault cars, because the manufacturer was insisting that customers could only lease batteries and not buy them as part of the vehicle.

Chevrolet has announced an eight-year battery warranty for the Volt, its rangeextended electric vehicle, and there are hopes that Vauxhall will offer a similar warranty for its Ampera variant of the same car.

The BVRLA has also expressed concerns that Renault’s insistence on battery leases would raise a number of legal, financial and competitive issues for its members.

Other manufacturers have yet to give details of their battery warranties, but Catherine Hutt, business development manager (electric vehicles) at the Society of Motor Manufacturers and Traders, said that most of them would “step up to the plate” and offer extended ones.

Battery leases and warranties are not the only aspects of electric vehicle ownership worrying fleets. Lee Hamlett, head of database at Inchcape Fleet Solutions, said his customers were also asking questions about range anxiety, residual values, purchase prices, charging infrastructure and possible government legislation. n

News in brief Leaseurope sets out national Refuelling charges – don’t get caught out

BVRLA members who use their own fuel pumps to refuel rental cars at the end of the hire may wish to treat this as a service charge when billing the customer.

best practices to beat fraud Leaseurope, the umbrella body for European rental and leasing trade associations, has published a report on the industry’s efforts to combat fraud across the continent.

Members choosing to treat this as a sale of road fuel will be required to comply with the Weights and Measures Act 1985 which would require the volume of fuel sold to be measured through pumps that have been tested and calibrated in accordance with the law – as is the case with commercial fuel stations.

Fighting Fraud highlights initiatives taken by associations and firms across Europe and sets out national best practices in fraud prevention. Leaseurope hopes the publication will raise awareness of the measures that are appropriate and effective in each country it covers.

FleetNet invites tenders to distribute vehicle codes

For example, the Belgian trade association Renta has a system for receiving fraud warnings and incident reports from its short-term vehicle rental members. These warnings are then passed on to the association’s other

FleetNet, an organisation that develops and promotes e-commerce in the fleet industry, is inviting tenders for the management and distribution of its vehicle model codes. The codes are in use across numerous fleet industry applications.

The deadline for proposals from potential suppliers is 3 September and the target implementation date is 1 February 2011.

To register interest, contact Colin Mallen, FleetNet secretary.

Contact Colin Mallen Colin.Mallen@masterlease.uk.com 0870 732 4444

short-term rental members and the police. Renta can also respond to police requests for information on suspected fraudsters.

The BVRLA’s RISC Online database is also featured. RISC enables rental companies to share information about ‘risky renters’ in a way that complies with data protection legislation. To learn more about RISC, contact member services executive Steph Czaplinska. n Contact Steph Czaplinska, steph@bvrla.co.uk 01494 545702 Information on Fighting Fraud can be found on the Leaseurope website. www.leaseurope.org

Auctioned fleet cars boost BEN Fleets Backing BEN, the used vehicle donation scheme launched earlier this year, could raise an extra £300,000 a year for the automotive industry charity.

“This way donations are spread across the year in line with the volume of business that leasing companies are doing,” said Nigel Williams, BEN’s head of national development.

As an alternative to writing an annual cheque, the scheme sees leasing companies make a donation of £1 for each car they sell at auction. The payment is made by the auction house and then deducted from the credit note for each vehicle.

A number of BVRLA leasing members have already signed up for the scheme and BEN will shortly be writing to more leasing and rental companies to invite their participation. The charity has also launched a similar donation model for motor dealers. n

Sustainable road transport in an age of austerity

BVRLA Industry Conference 2010 Industry figures and experts will give vital insight into some of the key issues for the months ahead.

Topics include: the state of the economy • the future of fleets • emissions, congestion and road infrastructure For further information see the BVRLA website or contact Steph Czaplinska on 01494 545702, steph@bvrla.co.uk

Heritage Motor Centre, Gaydon, Warwickshire

2 December BVRLA News | August 2010

Survey values drop in July

Training courses

The BVRLA’s ongoing survey of predicted residual values shows a dramatic fall for the ‘basket’ of cars it tracks.

The BVRLA data survey also collects service, maintenance and repair (SMR) budget data from members for five age and mileage parameters.

Certificate in Fleet Consultancy Module One: 14 – 15 September Module Two: 16 – 17 November Amersham

In July the industry mean value (IMV) for the cars tracked fell by 4.99% to £6,806.74. That’s down by £357.75 on the June figure of £7,164.49. The IMV for the industry van basket also dropped in July – down by 1.11% (£44.40) to £3,963.19.

July’s data shows very small reductions in average SMR budgets for diesel, petrol and hybrid vehicles month on month, but huge falls over the past 12 months, particularly in hybrids – down from £2,533.18 to £2,129.06 (down by 15.95%). n

Residual values 2010 BVRLA basket of vehicles (three years/60,000 miles)

n Car average n Light commercial vehicle average

£8k £7k £6k

Accredited by the Institute of Leadership and Management (ILM), this course is aimed at senior sales executives and account managers. It is designed to align the rental/leasing sales function more closely with the needs and responsibilities of a typical fleet manager. It discusses key principles of fleet management and delivering fleet solutions.

Contact Nora Leggett, nora@bvrla.co.uk 01494 545713

Fair Wear and Tear Standards 23 September Dunton Park

£5k £4k £3k £2k £1k Jan

Feb

March

April

May

June

July

Committee meetings 2010 Committee of Management

19 Aug

18 Nov

Chairman’s Committee

28 Oct

Commercial Vehicle Committee

7 Sept

30 Nov

Leasing & Fleet Management Committee

21 Sept

7 Dec

19 Oct

Leasing Broker Committee

Rental Committee RVR Forum Committee

5 Oct

23 Nov

16 Sept

9 Dec

SMR Forum Committee

25 Nov

Risk Management & Security Committee

Training programme 2010 Certificate in Fleet Consultancy

Amersham

Fair Wear and Tear Standards

Dunton Park

(module one)

City & Guilds Vehicle Rental Operator UK-wide

14-15 Sept 23 Sept 12 Oct

Selling Contract Hire

Amersham

20-21 Oct

Certificate in Fleet Consultancy

Amersham

16-17 Nov

(module two)

In-house training – dates available upon request For further information about all BVRLA courses, contact Nora Leggett: nora@bvrla.co.uk, 01494 545713

New members BVRLA News | August 2010

AVH Ltd (Uxbridge)

Stylish Car Hire (London)

Run by BVRLA-accredited training provider Manheim Inspection Services, this course aims to give an understanding of the factors affecting vehicle resale values and BVRLA Fair Wear and Tear standards. It is ideal for staff who regularly discuss vehicle condition with customers.

Contact Fran Hampson, frances@bvrla.co.uk 01494 545703

ATA Technical Customer Service Advisor Assessment dates available in September and October

Under this programme, any technical customer service advisor will be able to gain accredited status by successfully completing a series of practical assessments and knowledge tests.

Contact Fran Hampson, frances@bvrla.co.uk 01494 545703

City & Guilds Vehicle Rental Operator accreditation 12 October UK-wide test centres

This nationally recognised certificate tests knowledge of vehicle rental operations and best practice.

Contact Fran Hampson, frances@bvrla.co.uk 01494 545703 7