ALMOST a quarter of fleets (23%) say they expect to lengthen their company car lease contracts because of growth in home working, according to new research.
The 2023 Arval Mobility Observatory Barometer surveyed businesses who have introduced or extended working-from-home since the start of the pandemic. It found that the move towards contract extensions is more pronounced among larger companies with more than 1,000 employees (38%) compared to the smallest with fewer than 10 (24%).
Shaun Sadlier, Head of Arval Mobility Observatory in the UK, said: “What we are seeing here is a number of trends converging following the pandemic. The most important is that some fleets are now covering markedly fewer miles, allowing them to operate vehicles for longer without higher mileage becoming an issue.
“Home working is one of the main reasons for this trend. If people aren’t driving to work at least some of the time, their cars are simply not accumulating the same kind of mileage as when they commuted more often, and those vehicles can be operated for potentially quite a lot longer, perhaps a year or more.
“The financial side of this argument is that longer leases are generally lower cost on a month-by-month basis, certainly up to the point where maintenance becomes an issue, when the potential for major component failure becomes a likelihood.”
Interestingly, some businesses surveyed (14%) believe that homeworking will lead to a reduction in contract lengths, with activity this time concentrated towards smaller fleets (22%) compared to the largest (4%).
Sadlier said: “This is an interesting response. Presumably, these businesses have run the figures and found that for the kinds of cars that they operate and the lower mileages they are covering, it makes financial sense to replace them more regularly. However, we have seen very few cases of this happening at Arval in the UK.”
In a separate question, Arval Mobility Observatory Barometer also showed that the average length that UK companies operate cars is now 4.7 years, ranging from 5.1 from the smallest companies to 4.6 for the largest. Sadlier added: “This is the first year that we have asked this question, so we have no historical data against which to make a comparison, but certainly our best estimate is that this figure is perhaps a year longer than before the pandemic.
“Of course, this increase is not just about home working. A key development is simply that getting hold of replacement vehicles has been extremely difficult following the pandemic. The situation is now beginning to ease a little, but fleets have not been cycling through the buying and selling of cars in the normal fashion because it has been pretty much impossible.
“A further change that fleets have discovered from keeping modern cars for longer is that they are capable of higher mileages without reductions in reliability that would make them unsustainable. A car entering its fifth year with perhaps 80-100,000 miles on the clock is less reliable that one that is two years younger but probably not to a degree that is problematic.”