November 27, 2020

Long-term thinking requires the flexibility that leasing offers, especially in uncertain times

These are fascinating and confusing times, and the automotive industry is no exception. As an employer, you want your fleet to be sustainable. Your range of cars should be attractive to your employees and beneficial to the company. What about vehicles that are suddenly subjected to higher taxes? And when will you be switching to electric vehicles? Despite all the questions and uncertainty, long-term thinking is important. That's where the flexibility and expertise of a leasing company can come in very handy.

We're living in a world of change, and the automotive industry is evolving faster than ever before. There will be more changes in the next two to three years than there have been in the past decade. These are unprecedented times for a leasing company. Not so long ago, everyone was leasing the same product, which was packaged in different guises. Developments in vehicle leasing were on a par with the evolution of the well-known Heinz Ketchup bottle, which has been on supermarket shelves all our lives. We can be certain that the ketchup will continue to be there for several generations to come. Lease plans, however, are evolving rapidly to meet the new social requirements.

Hidden costs

The overall financial cost of a car has become a complex factor in our new reality. One element of this is the new measures the government has put on the table. Some employers fail to move beyond short-term thinking and only look at the vehicles' price tags. Long-term thinking and action are necessary, because they prepare you for several challenges when selecting cars. For example, cars have now also been included in cafeteria plans in an effort to better address employees' individual needs.

In itself, such a plan is a more expensive investment than giving the same benefits to everyone, but employers realise that the price of unhappy employees who may consider leaving the company is even higher. The war for talent is raging, so you need strong arguments to attract certain profiles. These are all hidden costs that are difficult to express in figures or amounts. What is certain is that a long-term vision that includes a sustainable fleet makes a big difference.

In addition, it's also important for employers to analyse a car's TCO in more detail. What are the costs before and after tax? How much tax can be deducted? What is the impact on social security contributions and other components? All those factors will affect the car's total price over time. We need to take into account a wide range of complex rules, and to make matters even more complicated, these rules tend to change from one year to the next. To respond to these changes quickly, companies need flexibility. And that just so happens to be the main advantage of leasing in such a complex situation.

 

Electric or not?

Many employers are currently asking themselves: "When should my company switch to an electric fleet, knowing that the Belgian and European legislation is about to change in that regard?" Sustainability has become a key issue for organisations as well as employees. A green label helps to shape a company's image and may be the clincher that convinces your potential customers and potential employees. That's why most employers are thinking about switching to electric vehicles, even though they may not yet have a complete picture of the possibilities.

In practice, electric models are certainly no more expensive than conventional cars. This is because the higher purchase price is offset by the higher tax deductibility of the costs, the duration and the elimination of certain costs. It's true that many questions about electric vehicles remain unanswered for now. What about the cost of electricity, the term of the lease contract and the residual value? Will we have to take the car to the garage less often than a car with an internal combustion engine? How long will the battery last? All of these elements will also affect the total cost.

Companies that aren't following the evolution of the company car market very closely are finding it impossible to get an accurate big picture. Fortunately, a leasing partner does have all this expertise and can offer tailor-made advice. LeasePlan has experts who focus only on electric vehicles because the subject matter is so complex. You can start by drawing up a business case and performing an analysis.  Of course, we don't have a crystal ball that predicts the future, but electric cars are undoubtedly the best choice at this time. That's why we need to debunk any preconceptions about the cost.

"En fait, à l'instar d'un smartphone, il faudrait oser considérer la voiture comme un objet d'usage courant. Mais surtout, ne plus seulement réfléchir en termes financiers."Werner Stevens, CFO LeasePlan Belgium

Usage over ownership

The way things are going now, zero-emission cars will be the norm by 2026. You therefore need to make the necessary preparations. Companies need a refreshed fleet that at least offers people the opportunity to switch to electric vehicles fast. In recent years, the number of electric vehicle registrations has been growing slowly but surely – but raising awareness takes time. It also takes time to develop and install the necessary infrastructure and charging stations.

Of course, the evolution towards green vehicles shouldn't just be confined to the business world. Private individuals also need to be encouraged to choose a green alternative in the coming years, and that's why each and every myth needs to be exposed. Some companies are playing a pioneering role and are rapidly switching to an electric fleet. This is a wise choice, assuming that the tax benefits for electric vehicles will go up even more in the years ahead.

It's not easy to develop a long-term vision when the future looks so uncertain. However, one of the things you can do is determine the end point of your journey. Leasing gives you the flexibility to make the necessary adjustments as you move forward. We shouldn't be afraid to look at our vehicles the way we look at our smartphones: as pieces of equipment. It's the only way we can learn to think beyond just the financial aspects. As Aristotle said a long time ago: "If something doesn't add value, why own it?"