Car contract extensions for remote employees
【Summary】One in four fleets are planning to extend company car lease contracts due to the increase in working from home. Larger companies are more likely to opt for contract extensions, while smaller businesses anticipate a reduction in contract lengths. The average length of car operation for UK companies is now 4.7 years, which is potentially a year longer than before the pandemic.
The post-pandemic growth in working from home has had a significant impact on 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 nearly one in four fleets (23%) expect to extend their lease contracts.
Interestingly, the move towards contract extensions is more prevalent among larger companies with over 1,000 employees, with 38% considering lengthening their leases. In comparison, only 24% of the smallest companies with fewer than 10 employees are planning to do the same.
Shaun Sadlier, head of Arval Mobility Observatory in the UK, explained that several trends have emerged following the pandemic. One of the most significant factors is that some fleets are now covering fewer miles, allowing them to operate vehicles for longer periods without mileage becoming a concern. This shift can be attributed to the rise of remote work. With people no longer commuting to the office as frequently, their cars are accumulating less mileage. As a result, these vehicles can be operated for an extended duration, possibly up to a year or more.
Furthermore, longer leases often come with lower monthly costs, providing financial incentives for fleets. However, Sadlier points out that this is only true until maintenance becomes an issue, as the likelihood of major component failure increases.
Interestingly, the research also revealed that some businesses (14%) believe that remote work will lead to a reduction in contract lengths. This belief is more prevalent among smaller fleets (22%) compared to larger ones (4%). Sadlier suggests that these businesses have analyzed the figures and concluded that it makes financial sense to replace their cars more frequently due to lower mileages. However, such cases have been rare at Arval in the UK.
The average length of time that UK companies operate cars is now 4.7 years, according to the Arval Mobility Observatory Barometer. The duration ranges from 5.1 years for the smallest companies to 4.6 years for the largest. Although there is no historical data for comparison, the report estimates that this figure is approximately one year longer than before the pandemic.
Sadlier explains that the increase in lease durations is not solely attributed to remote work. The difficulty of obtaining replacement vehicles following the pandemic has also played a significant role. While the situation is gradually improving, fleets have been unable to cycle through the buying and selling of cars as usual due to the challenges in the market.
Furthermore, fleets have discovered that modern cars can handle higher mileages without a significant decrease in reliability, making them more sustainable over longer periods. Sadlier concludes that while a car entering its fifth year with 80-100,000 miles on the clock may be less reliable than a two-year-old car, the difference is not problematic.
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