Car contract extensions for remote employees
【Summary】The increase in remote work due to the pandemic has led to 23% of fleets planning to extend company car lease contracts. Larger companies are more likely to extend contracts, with 38% of those with over 1,000 employees planning to do so. The trend is driven by reduced mileage and lower costs, but maintenance becomes a concern after a certain point. Some smaller fleets (22%) believe that remote work will lead to shorter contract lengths.
The post-pandemic growth in working from home has had a significant impact on fleet management, with nearly one in four fleets (23%) expecting to extend company car lease contracts, according to new research. The 2023 Arval Mobility Observatory Barometer surveyed businesses that have implemented or expanded remote work since the start of the pandemic. The study found that larger companies with over 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, highlighted several factors contributing to this trend. One of the key reasons is that some fleets are now covering fewer miles, allowing them to keep vehicles in operation for longer periods without concerns about high mileage. The rise in remote work has significantly reduced commuting mileage, enabling vehicles to be used for extended periods, potentially up to a year or more. Additionally, longer leases offer financial benefits, as they generally have lower monthly costs. However, maintenance becomes a concern when major component failures become more likely.
Interestingly, the research also revealed that a small percentage of businesses (14%) believe that remote work will lead to shorter contract lengths. This belief is more prevalent among smaller fleets (22%) compared to larger ones (4%). Sadlier suggests that these businesses have analyzed the financial implications and determined that it is more cost-effective to replace cars more frequently, considering the type of vehicles they operate and the lower mileage they cover. However, this shift has not been widely observed at Arval in the UK.
The Arval Mobility Observatory Barometer further indicates 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. Although historical data for comparison is not available, the Barometer estimates that this figure has increased by approximately a year since before the pandemic. Sadlier explains that this increase is not solely due to remote work but is also influenced by challenges in acquiring replacement vehicles. The situation has improved slightly, but the buying and selling of cars has been significantly disrupted.
Fleets have discovered that modern cars can handle higher mileages without compromising reliability to an unsustainable extent. 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 younger vehicle, the difference is not significant enough to pose major issues.
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