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JOHANNESBURG - Whether you are on the verge of buying the first vehicle for your business or expanding an existing fleet, there are a few purchase options on top of deciding to go the new or used route.

According to Deloitte, fleet management is one of the most critically important industries in the global economy.

Mohammed Sadar of auction.co.za believes that understanding some of the intricacies involved in managing a company fleet is important if a business is to make an informed decision on how best to expand it.

With just about every manufacturer and dealership providing discounted rates to businesses looking to buy in bulk, you have to be cautious.

Understanding your choice

The initial decision must be based on what the vehicle will be used for: to deliver parcels, transport furniture, or transport bulk items?

The next step is to draw up a budget. Given the variety of vehicles available, don’t be tempted to buy something that’s too expensive. And keep the insurance costs of the vehicle and associated maintenance and petrol (or diesel) expenses in mind. All these can quickly spiral out of control if not managed properly.

Financing is the most important aspect of the fleet vehicle process. You have two options: either opting to own your vehicle; or, taking out a full maintenance lease (FML).

The former is perhaps the most straightforward choice. The business purchases the vehicle (either through a capital outlay or by financing through the bank) and then manages the fleet itself. This includes the maintenance and disposal of the vehicle.

FML sees a business enter a lease agreement (typically two-, three- or four-year options) with a financial institution, after which the vehicle or fleet is returned. However, the bank is responsible for maintaining the vehicles, and manages the process when they break down, have accident issues, or repairs are undertaken.

Depending on cash flow and budgets, going the leased route might be a more affordable way to start building a fleet. This also provides the company with a perfect test period to figure out exactly what the vehicles will be used for.

Second hand can work

According to the National Association of Automobile Manufacturers of SA, fleet sales accounted for 3.1% of the total industry sales of just under 50000 vehicles in September last year. It believes this number is reflective of businesses delaying purchasing decisions on new vehicles until the economy stabilises.

Another aspect impacting the sales of new vehicles for fleets is the fact that they start losing value the moment they are driven off the showroom floor. So, just like a consumer spending a lot of money on buying new (and losing almost 10% of the market value when driving it home), a business carries the same financial risk. The only difference is that when you purchase a fleet of several vehicles, that cost can significantly impact the financial bottom-line.

A great tip is to consider buying a vehicle that is less than a year old. In that way, you still get the perks of a maintenance plan and low mileage, while not sacrificing money on lost value.

What to do with your older vehicles

When you inevitably need to dispose of your fleet vehicles (if not part of a lease agreement), then going the online route through a specialised site could be a viable option. This allows you to remain focused on delivering strategic value to your customers instead of having the hassle and risk of dealing with second-hand vehicle outlets.

Drive360