AMG Autolease Ltd

Auto Industry Round-Up

1^st March 2012

In this edition:

Fleet stories

Note: the Auto Industry Round-Up contains articles which have been featured in various industry press sources in the last week.

Fleet stories

RBS closes Lombard Vehicle Management and signs deal with ALD LOMBARD Vehicle Management, one of the UK’s largest contract hire and fleet management companies, is to close. Parent company Royal Bank of Scotland has made the decision after failing to find a buyer for the business, which it declared as ‘non-core’ in 2009. The decision does not impact on other Lombard businesses.

Lombard Vehicle Management currently has 58,000 cars and vans on its books and has entered into an arrangement with rival ALD Automotive to provide a white labelled outsourced service to existing customers. No new business will be written by Lombard Vehicle Management.

A spokeswoman for Lombard said that it was expected that ALD Automotive would start its outsourced management service to Lombard Vehicle Management clients in June or July. The branding for the new operation is still to be announced.

What is said will be an ‘orderly wind down’ of the Lombard Vehicle Management book is predicted to take two to three years, although the agreement with ALD Automotive lasts for five years to ensure ‘all contracts are covered off’, according to the spokeswoman. Currently Lombard Vehicle Management is ranked as Britain’s sixth largest vehicle leasing company, although seven years ago it was fourth with a fleet of more than 116,000 vehicles. A total of 98 staff will lose their job at Lombard Vehicle Management although Lombard is looking to redeploy some within its other businesses with compulsory redundancies kept to a minimum.

A spokesman for Royal Bank of Scotland, the largely taxpayer owned bank, said: ‘Having to cut jobs is the most difficult part of our work to rebuild RBS. The decision to close Lombard Vehicle Management was a difficult one but is a necessary step in our plan to de-risk and re-focus RBS, making the bank safer and stronger.

‘We will do all we can to support our staff, offer redeployment opportunities wherever possible, and keep compulsory redundancies to an absolute minimum.’

Last year it was widely report that GE Capital Fleet Services were interested in buying Lombard Vehicle Management however no deal resulted. ALD Automotive currently has more than 73,000 vehicles on its books and is predicting that it will write about 30,000 new contracts on the back of its work managing the winding down of the Lombard book.

ALD Automotive says it is now the UK’s leading white-label provider and the latest agreement further reinforces the success of its multi-sales channel strategy. The company has seen fleet growth in excess of 20% per annum over the past two years founded on developing its core Business Services division alongside a number of strategic white-label partners, a Broker division and an established Dealer Services division.

ALD Automotive managing director Keith Allen said: ‘We’re delighted that RBS and Lombard have chosen ALD to provide contract hire and fleet management solutions for Lombard. ‘The new proposition will have access to all the vehicle leasing business generated through RBSbanking and Lombard relationships, reinforcing the success of the multi-sales channel strategy we have adopted to grow our business and driving the business further forward to become a top three player within the UK leasing industry.’

Businesses to review fuel reclaims process this year

ALMOST two thirds (63%) of UK financial directors of larger businesses will be reviewing their fuel reclaims process associated with business mileage in 2012.

The finding in the latest ALD Automotive YouGov survey comes with businesses liable to investigation and tax bills as HM Revenue and Customs (HMRC) hardens its line on incomplete or inaccurate mileage records.

The findings in the survey of financial directors at companies employing 500-999 people suggests that companies are now taking the threat of prosecution by HMRC more seriously and are recognising that inaccurate or fraudulent business mileage claims can have a major impact on cost control and fleet budgeting, says the vehicle leasing and fleet management company.

Keith Allen, managing director of ALD Automotive, said: ‘With HMRC cracking down on companies which aren’t able to provide auditable records it’s in the interest of every business to ensure that employees driving on work-related journeys file accurate mileage reports and appropriate online systems are put in place to manage this area.

‘Not only will it reduce the risk of the employer and employee being liable to action but experience suggests that significant savings can also be achieved in fuel cost.’

For organisations looking to mitigate their risk, it is recommended that businesses have a robust process in place and telematics is one such solution available to fleet managers.

‘QUALEC effect’ to hit corporate and driver company car tax bills COMPANY car drivers and businesses will face tax increases on more than four out of 10 models from April 6 as a result of the abolition of major changes to the benefit-in-kind tax regime, according to calculations by Lex Autolease.

Data gathered by the UK’s largest leasing company reveals that 45% of new car orders will fall into the 100 g/km to 120 g/km tax band and be hit by the so called ‘QUALEC Effect’. The figures are based on a sample of Lex Autolease deliveries to customers between August 1 and October 31 last year. A total of 16,172 cars were delivered of which 1,366 (8%) were 99 g/km and below and 7,312 (45%) 100-120 g/km.

These vehicles, as well as any existing company cars with emissions of more than 99 g/km of carbon dioxide, will be subject to a higher tax burden from the new financial years starting on April 6 when the rules for qualifying low emission cars (QUALEC) are abolished.

The future cost increase is attributed to HM Revenue and Customs’ decision to lower the 10% tax threshold from 120 g/km to 99 g/km.

Lex Autolease calculates that only 8% of cars ordered will qualify for the new 10% company car benefit- in-kind tax band (76-99g/km).

So, despite recent efforts by manufacturers to launch sub-120g/km vehicles and fleets’ or drivers’ decisions to adopt these, many will face a tax increase with an adverse impact on Employers’ National Insurance contributions (NIC) as well.

Based on a fleet of 500 vehicles, comprising a mix of Volkswagen Golf 1.6Tdi 105 Match and BMW 318dSE emitting 119 g/km, this will generate an annual increase in Employers’ NIC costs of over £60,000.

For an employee, driving the same BMW 318d, they will be hit with a yearly benefit-in-kind tax increase of £216, if they are a 20% taxpayer, and £432 at the 40% tax rate.

Paul Lippitt, principle consultant at Lex Autolease, said: ‘No fleet is likely to escape the ‘QUALEC Effect’, unless they are operating an entirely sub-99 g/km policy and there aren’t many of those about. We suspect that a large number of firms have not yet taken pre-emptive steps to mitigate the impact and inform their employees.

‘Senior management may be less concerned if they have recently taken delivery of a low-emitting BMW

5 Series or Volvo S80, and can stomach the additional benefit-in-kind, but the cost increase will come as a shock to middle and junior managers. From a corporate perspective, larger fleets will notice a measurable increase in costs on their bottom line. Most lease periods run over three or four years, so there is no getting away from the impact in a hurry. In fact, the thresholds will continue to reduce in2013/14, so companies need to be aware there are further tax increases in the pipeline.’

Lex Autolease says that fleet and drivers seeking to avoid this April’s tax changes need to consider sub- 99g/km cars, or even sub-95g/km, to prevent another hike in April 2013.

Currently, there are over 200 model/trim levels outputting exactly 119 g/km, which will be taxed at 14% instead of 10% in April 2012, rising to 15% in 2013 (add 3% for diesel models)..

Lippitt said: ‘Companies need to actively review their fleet policies and develop plans to adopt sub-99 g/km models, which will support the driver’s need to manage benefit-in-kind costs and the corporate objective of cost reduction.’