With the number of construction start-ups increasing by nearly a quarter in the first three months of 2016, and the Construction Products Association predicting a 3.6% increase in construction work this year, it’s no surprise that the commercial van market is booming.
According to the Society of Motor Manufacturers and Traders (SMMT), nearly 28,000 new vans were registered in the United Kingdom in April, marking the third consecutive month of growth.
Large vans continue to dominate the market, with 3.3 percent more light commercial vehicles (LCVs) registered in the UK in the first four months of 2015 compared to the same period in 2015.
Heavier vans were also popular, with registrations for the 2.5-3.5T sector increasing by 22.6 percent and pick-ups increasing by 35.4 percent in April.
Ford leads the way in best-sellers with nearly 40,000 new LCV registrations in the first quarter of the year. In April, the manufacturer registered nearly twice as many LCVs as its nearest competitor, Volkswagen, with 8,219 registrations.
The light commercial vehicle market reached an all-time high in 2015, thanks to strong van sales, and “the LCV market has traditionally been a pretty accurate barometer of the economic well-being of UK PLC,” according to light commercial vehicle industry consultant Tim Cattlin.
“The current health of both of these entities reflects this once more.”
Sales in the used market are also strong, with vans that require little preparation and have the right specifications in high demand.
“This naturally keeps prices relatively high while demand from the SME sector remains stimulated,” Cattlin says.
However, with a record number of new vans registered in the last three to four years beginning to hit the auction block, Cattlin expects used market prices to fall.
“The laws of supply and demand would suggest that the retail buyer will win here, with prices significantly softening,” he says.
But why should construction companies upgrade their fleet, and should they buy or rent?
THE ISSUE OF OLD VANS
Commercial vehicles continue to be an important part of a construction company’s plant and machinery inventory, and in a deadline-driven industry, operating an ageing fleet can be difficult.
According to RAC research, every day a vehicle is out of service costs £500, so keeping vans and HGVs in roadworthy condition is critical.
According to the Driver and Vehicle Standards Agency (DVSA), 49% of class seven vans (3-3.5 tonnes gross vehicle weight) failed their first-time MOT tests in 2014/15, with lighting and signalling, brakes, suspension, and driver’s view of the road cited as the main issues.
“Aging vehicles are less reliable, and their upkeep can be costly,” says David Brennan, CEO of Nexus Vehicle Rental, a leading corporate vehicle rental provider.
“Construction is a distinct and diverse industry that includes public and private housing, industrial and commercial projects, and major infrastructure.”
“Because vehicles are frequently subjected to demanding environments and heavy workloads, keeping them operational is critical in an industry where downtime is the fleet manager’s worst nightmare.”
Dominic Reid, business development manager at Northgate Vehicle Hire, concurs, stating that firms risk tarnishing their reputation by failing to replace old vehicles.
“Reliability, performance, and appearance can all deteriorate over time, with significant implications for cost, customer service, and brand image.”
According to Reid, the obvious solution is to “dispose of old vehicles in favour of a new van,” but “for many companies, whether they have a plant contract hire or purchased outright, the time, hassle, cost, and contractual limitations involved with disposal will often prevent them from doing so.”
THE BENEFITS OF NEWER VEHICLES
The main benefits of running a fleet of new vehicles are increased security and access to the latest technologies, while “fuel efficiency is one of the key cost-saving aspects that can make a significant difference when applied across multiple vehicles that each travel thousands of miles per year,” according to Reid.
“Telematics is now central to the operations of many businesses that operate a fleet of vehicles, delivering management information that supports customer service improvement and cost-cutting in vehicle operations – not to mention duty of care and driver safety, to name a few.”
“The advantages of driving new vehicles extend even to employee retention, providing a more pleasant working environment and even perks such as Bluetooth or a satnav.”
However, with a diverse fleet of vehicles ranging from LCVs to HGVs and specialised equipment, purchasing, taxing, insuring, and maintaining commercial vehicles can be “an expensive outgoing and rapid depreciation is common,” according to Brennan.
THE BENEFITS OF RENTAL
Alternatives to purchasing vehicles outright include flexible, long-term, and daily hire, which provides firms with access to the most recent vehicles while also including maintenance and breakdown coverage. Companies can easily upgrade to new technology because less money is required up front.
According to Brennan, research from the University of Buckingham’s Centre for Automotive Management has revealed that LCV rental is a critical factor in the economy’s recovery.
“It all comes down to being able to provide a completely flexible vehicle solution,” he says.
“Rented vehicles are newer, more well-maintained, and more dependable than older fleet vehicles.” They can only be used when they are required. Furthermore, stringent SLAs, such as those provided by Nexus, ensure legally compliant vehicles and a consistently high standard.”
According to Brennan, “specialist features and modifications such as tail lifts, tow bars, racking, chevrons and beacons, and lighting can be catered for,” which is why more businesses are drawn to the advantages of daily rental.
Northgate has a network of 50 wholly-owned and warranty-approved workshops, and Reid explains that flexible long-term hire “provides a complete solution because the hire company manages servicing, maintenance, and breakdowns.”
“Downtime can be minimised by proactive scheduling of maintenance events at the most convenient branch and workshop,” he says.
“Customers do not face the risk of lost income due to downtime, as they would with contract hire or purchasing vans outright, nor do they have to worry about extra costs such as tyres, MOT repairs, breakdown cover, and replacement vehicle – all for a fixed monthly fee that makes budgeting easy and predictable.”
GETTING THE BEST RENTAL RATES
While availability and quality of a vehicle are arguably more important than price, “the tendering process that is central to many projects means cost is often a deciding factor in a job,” according to Brennan.
“Daily rental is an efficient way to keep fleet costs low.” However, choosing price over quality isn’t always the best option, as cheaper rental packages can sometimes result in inferior vehicles and decreased reliability.”
According to Gareth Jones, managing director of Dawsonrentals Vans, the rental industry’s job is to adapt to the needs of any individual business.
“No matter who the customer is, the contract will be won based on how effectively you can adapt your product to meet their specific needs,” he says, emphasising the importance of managing security and efficiency through technology.
“We’re considering these goals and responding with additional investment in advanced telematics, as our new monitoring systems continue to report remarkable reductions in engine idling, speeding, and on-the-job wear and tear.”
“In addition to focusing on minimising a vehicle’s depreciation while in use, responsible vehicle providers are increasingly providing a more trustworthy service.” This means lower end-of-life charges and more judicious investment in damage-limitation tools.”
Another reason to choose rentals is plant theft, which costs the construction industry more than £800 million each year.
“Replacing owned vehicles after theft can be a long, laborious, and expensive process for businesses,” Brennan says.
“Because rental vehicles are typically newer, they are outfitted with cutting-edge security features that reduce the likelihood of theft.” And, in the worst-case scenario, providers can quickly find a replacement.”
Given the industry’s diversity and fluctuating vehicle needs, Brennan believes rental can play an important role in the successful delivery of construction business strategy.
“It not only provides companies with a cost-effective alternative to purchasing, but it also reduces waste, provides complete flexibility, reliability, and security, and allows companies to flex their existing fleet to meet their needs,” he says.
PROFITABILITY AND FUEL EFFICIENCY MAXIMIZATION
TyrePal’s business development manager, Peter Tillotson, explains how managing tyre pressure is critical to keeping commercial vehicles on the road.
Thirty-three percent of a fully-loaded heavy goods vehicle’s fuel consumption can be attributed to overcoming tyre rolling resistance.
If the tyres are under-inflated, this percentage rises even higher. If a vehicle’s tyres are under-inflated by 15 pounds per square inch (PSI), it can result in 6% more fuel consumption and a £150 cost increase per year on a £2,500 fuel budget.
Under and over-inflation put undue strain on tyre sidewalls, causing them to overheat, collapse, and blow out.
Managers can reduce fuel usage, breakdowns, and ensure driver and road safety by installing a tyre pressure monitoring system (TPMS) like TyrePal in vehicles. Drivers receive an early dashboard warning that tyre pressure is decreasing.
WHAT QUESTIONS SHOULD YOU ASK A RENTAL PROVIDER?
Nexus Vehicle Rental CEO David Brennan offers his advice.
Fleet managers are realising that the daily rate is not the most important factor to consider when selecting a rental provider.
Initially appealing rates may be offered in order to secure new business; however, what may follow is poor service, inaccurate invoicing, issues with damages and fuel, and incorrect information that could jeopardise your Motor Insurance Database (MID) insurance.
Nexus can focus on delivering a more consultative approach based on real-time information, advising clients on how to increase efficiency and reduce costs because it does not own the vehicles.
Fleet managers should ask more probing questions of their rental provider to ensure they are getting the best deal.
When looking to book construction vehicles, ask the following questions to a daily rental provider:
- Getting a car or a standard van is simple; getting a supplier to provide specialist vehicles, such as 4x4s with tow bars or flatbed tippers with beacons, quickly and efficiently is not. How can you assist me with this requirement?
- I’m being asked more and more to provide more in-depth management information (MI) to my stakeholders; what MI can you provide, and can I have a bespoke report if necessary?
- How will you improve customer service while lowering rental costs such as damage, fuel, and invoice inaccuracies?
- How do you ensure that we manage all vehicle hire requests in accordance with our internal fleet policy with vehicle bookers located across multiple sites?
CASE STUDY: NEXUS VEHICLE RENTAL READY TO GO
Carillion relies on Nexus Vehicle Rental for managed partner support and short-term ad hoc rental needs.
It is a leading UK support services provider with extensive construction capabilities, with approximately 750 vehicles on the road at any given time. Nexus manages all of these on Carillion’s behalf, whether they are Nexus rentals or those from other providers, using its proprietary IRIS software management system.
The company must routinely respond very quickly to short-notice demands, such as urgent construction jobs, where cars and vans equipped with appropriate kit and safety gear are suddenly required at site locations. Nexus is in charge of managing vehicle supply for Carillion departments, customers, and partners.
This includes making the reservation, overseeing it throughout the contract, and reconciling any differing instructions, such as a different return point, extensions, or early returns.
Carillion frequently handles traffic management on its construction, road, and infrastructure projects, necessitating the use of specially marked vehicles outfitted with a variety of specialist tools, electronic parts, beacons, and tow bars. Mess vans, complete with sleeping, washing, and cooking facilities, are frequently required.
Nexus provides all of these services, controlling and questioning the costs of all providers to keep outlay to a minimum and closely scrutinising fuel and damage expense claims. Nexus also ensures that all vehicle and driver compliances, due diligence, and health and safety requirements are met, which is critical to the operation’s and reputation’s safety.
“The Carillion IRIS system sorts each rental out in seconds, controlling costs and giving us high level management information that allows us to monitor the performance of all rental suppliers and our drivers,” said Chris Brown, Carillion fleet operations manager. It works flawlessly with our existing fleet database.
“Every aspect of the Nexus offering is designed to meet the highest standards, provide the most comprehensive services, the fastest speeds, and the greatest ease of use at the lowest possible cost.” We greatly value its breadth of experience and the strength of its intelligent IT, which enables us to provide the best possible service to our customers.”