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FLEET MANAGEMENT

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The strong Rand may have brought the end to price increases on new vehicles but it will also have a negative effect on used car values whose recent strong performance is due to those new car price increases. For fleet owners who have financed their own fleets that could have a marked effect on their balance sheets as these used vehicle assets decline in value, says Nicholas De Canha, CEO of Imperial Fleet Management This factor alone, he believes, makes Imperial Fleet management off balance-sheet financed even more attractive when one takes into account that residual values are guaranteed. With this option, Imperial Fleet Management holds the asset on their balance sheet, and all rentals incorporate residual values. Imperial than takes full risk on residual value and therefore risk on termination is eliminated entirely, he says. He points to the requirements of the International Financial Reporting Standards (FRS). The new IAS standards may require all companies to put back all leased assets including vehicles on the balance sheet. "The change in accounting standards will affect all businesses equally. Our focus at Imperial is on customer service and lowering operational costs through leasing, rather than outright purchase.

We can show that clients get a much better return on equity, lower their costs and improve their cash position with leasing options," he says. Imperial, has the largest retail new and used vehicle network, 250 dealers countrywide, is able to offer companies the best residual value on vehicles leased_ Imperial is also the largest contract service and maintenance plan provider in the country and the high RVs together with very competitive maintenance rates enables IFM to provide extremely low full maintenance rentals. The full maintenance rental enables clients to budget accurately as all the maintenance and depreciation is catered for in the single, stable payment which allows the client to concentrate on their core business rather than having to concern themselves with running a fleet.

These residual values, he points out, are established at the outset of any contract with Imperial and - depending on the type of vehicle and usage - are established as a fixed percentage of the cost of a vehicle. On average, passenger vehicles are leased over four years with a residual value that could be anywhere between 30 percent to 40 percent by contrast, are usually leased over a three year period. Currency strength reinforces need for professional management All rentals are clearly tax-deductible. ''Another important factor is that in today's climate it is often difficult for smaller companies to get credit whereas, with leasing, the credit conditions are different as the assets are still owned by IFM, he points out. Critical, also, with Imperial's leasing option is that maintenance is also included so that if there is a major expense companies that lease fleets from Imperial do not have to concern themselves if there is ~ major problem with any of the vehicles in the fleet. "Imperial Fleet Management is a total fleet management solution.

We aim to understand clients' needs and then deliver the most cost –effective and efficient fleet management solution," he says. Imperial Fleet Management is a total fleet management solution. We aim to understand clients' fleet needs and then deliver the most cost -effective and efficient fleet management solution. This includes the full spectrum of tailor-made fleet management solutions including operational rentals; which have both a funding component together with residual guarantees, and full maintenance rentals; which are operational rentals together with maintenance solutions; maintenance plans and managed maintenance.

An Operating Rental (OR) allows the client to fund a purchase as an off balance-sheet transaction, with Imperial Fleet Management holding the asset on · their balance sheet, and all rentals incorporate residual values Imperial Fleet Management take full risk on residual value and therefore risk on termination is eliminated entirely The fixed monthly rental in an operating rental includes the finance portion, depreciation (maintenance costs are excluded) and is determined by the choice of vehicle, period of usage and kilometre requirements. A full maintenance rental includes the maintenance costs and can include a lyre plan if the client requires. The inclusion of a maintenance product allows for more stable cash flows and better residual values. Imperial also offers a choice of Value Added Product (VAPS) which can be linked to the operating or full maintenance rental. This ranges from vehicle tracking (Imperial is part owner of both Matrix and WesBank is part owner of Tracker therefore giving IFM excellent pricing on both products) to even administering fines that a driver may incur. WesBank which manages this service on behalf of Imperial Fleet Management has a ·dedicated and experienced team that specialises in traffic fine administration. He points out that an Operating Rental allows the use of a vehicle of one's choice, without the risk of ownership, which enhances cash flow benefits. Operating Rentals, he says, reduce administration as depreciation and interest and all YAPS products are administered for the client who receives just one consolidated invoice. Another major advantage is that Operating Rentals are tax deductible as well as offering input VAT benefits as funding is not capitalised upfront Customers also need not worry about licensing or registration of vehicles - a small additional "add-on" service that
Imperial offers clients.

With its Traffic fines administration add-on option, De Canha points out, its takes a huge responsibility off the customer. "The fines management procedure is quite onerous in terms of the new NATIS and AARTO legislation - if not managed correctly - could result in penalties and even arrests. The company, the responsible entity, and the driver needs to be protected at all times, he points out. The AARTO legislation, when· introduced, will - via a merit system - expose the individuals who are not abiding to the law_ This creates the risks for individuals and companies where, for example, the driver or vehicle exceeds points as well as a host of other problems. All the more need, De Canha says, for companies to employ professional fleet management experts such as Imperial.

Article that appeared in The Star, Pretoria news, The Mercury and Cape Times