Car contract extensions for remote employees
【Summary】The growth of remote work has led to 23% of fleets planning to extend company car lease contracts. Larger companies are more likely to extend contracts (38% for those with over 1,000 employees compared to 24% for those with fewer than 10 employees). The decrease in mileage due to remote work allows vehicles to be operated for longer periods, resulting in lower costs.
The post-pandemic growth in working from home has had a significant impact on fleets, with nearly one in four expecting to extend company car lease contracts, according to new research. The 2023 Arval Mobility Observatory Barometer surveyed businesses that have implemented or extended remote work since the start of the pandemic. The study found that larger companies with more than 1,000 employees are more likely to opt for contract extensions (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 people working from home, their cars are not accumulating the same level of mileage as when they commuted regularly. This allows fleets to operate vehicles for longer periods without mileage becoming a concern. Additionally, longer leases often come with lower monthly costs, providing financial incentives for fleets.
Sadlier noted that the cost advantage of longer leases remains true until maintenance becomes an issue and the likelihood of major component failure increases. Interestingly, the research also revealed that some businesses (14%) believe that remote work will lead to shorter contract lengths, especially among smaller fleets (22%) compared to larger ones (4%). These businesses have likely determined that replacing cars more frequently makes financial sense due to lower mileages and specific car types.
The Arval Mobility Observatory Barometer also found that the average length of time UK companies operate cars is now 4.7 years, ranging from 5.1 years for the smallest companies to 4.6 years for the largest. 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 attributable to remote work but is also influenced by the challenges in acquiring replacement vehicles following the pandemic. However, fleets have discovered that modern cars are capable of higher mileages without a significant reduction in reliability.
In conclusion, the shift towards remote work has led to a significant increase in the expectation of longer company car lease contracts. While larger companies are more likely to opt for contract extensions, some businesses believe that remote work will result in shorter contracts for specific car types and lower mileages. The average length of time UK companies operate cars has also increased, possibly due to challenges in acquiring replacement vehicles. Despite higher mileages, modern cars have proven to be reliable even after several years of use.
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