Car contract extensions for remote employees
【Summary】The increase in working from home has led to 23% of fleets planning to extend company car lease contracts. This trend is more common among larger companies. With reduced mileage, vehicles can be operated for longer without maintenance issues. Longer leases are financially beneficial until maintenance becomes a concern. Some businesses believe that homeworking will lead to shorter contract lengths. On average, UK companies now operate cars for 4.
The post-pandemic growth in working from home has led to a significant number of fleets considering lengthening their company car lease contracts, according to new research. The 2023 Arval Mobility Observatory Barometer surveyed businesses that have implemented or expanded remote working since the start of the pandemic. The study found that larger companies with over 1,000 employees are more likely to extend their contracts (38%) compared to smaller companies with fewer than 10 employees (24%).
Shaun Sadlier, head of Arval Mobility Observatory in the UK, explained that several trends have emerged as a result of the pandemic. One of the main factors contributing to the trend of longer leases is the decrease in mileage. With employees working from home, their cars are not accumulating the same amount of mileage as when they commuted regularly. This allows fleets to operate vehicles for a longer period without mileage becoming a concern. Additionally, longer leases are generally more cost-effective on a monthly basis, providing financial incentives for fleets.
However, Sadlier noted that there is a point where maintenance becomes an issue, as the likelihood of major component failure increases. Interestingly, a small percentage of businesses surveyed (14%) believe that remote working will lead to shorter contract lengths. This belief is more prevalent among smaller fleets (22%) compared to larger ones (4%). These businesses have likely analyzed the financial implications and found it more sensible to replace their cars more frequently due to the lower mileages they cover.
The Arval Mobility Observatory Barometer also revealed that the average length of time UK companies operate cars is now 4.7 years, with smaller companies averaging 5.1 years and larger companies averaging 4.6 years. While there is no historical data for comparison, the Barometer estimates that this figure is approximately one year longer than before the pandemic. Sadlier explained that this increase is not solely attributed to remote working, but also to the difficulty of obtaining replacement vehicles following the pandemic.
Fleets have discovered that modern cars are capable of higher mileages without compromising reliability to an unsustainable degree. Sadlier concluded that a car entering its fifth year with 80-100,000 miles on the clock may be slightly less reliable than a car two years younger, but not to a problematic extent.
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