"Increasing costs of owning and maintaining vehicles and changing economic conditions is resulting in more corporate companies and government organizations internal fleet departments starting to consider acquiring the specialist services of fleet management companies, as a way of dealing with vehicle acquisition, maintenance and finance," says Peter Mageza, managing executive of Absa's vehicle and asset finance division.
"The changes in the vehicle market with the increasing number of new models and in some cases manufacturers building maintenance plans into the vehicles price, places new pressures on the companies fleet buyers to make more informed decisions," he adds.
"The effect of the volatile exchange rates and local inflation over the last two years has also created the need for more effective cost control and focus by fleet owners.
"So buying and maintaining a fleet could be an expensive exercise if not managed well. Fleet management companies offer a comprehensive service to fleet owners wanting to outsource this area of the business."
It all starts with the fleet management company assisting with the formulation of a fleet policy and the implementation thereof.
The company will also provide vehicle acquisition skills, structuring of the finance to meet client needs using the best suited finance products.
This may be traditional full maintenance leases. Here the fleet company carries the residual value risk and also takes care of vehicle disposal. (The company just returns the vehicles)
Other products offered include an operating rental (which could be linked with a managed maintenance contract).
They also have stand-alone-managed-maintenance-contracts for existing vehicles in a fleet. This provides for the pre-authorization of costs for maintaining vehicles and ensures good controls thereby avoiding unnecessary expenses being incurred.
Other value-adding products include direct debit based card solutions for fuel, roadside assistance, toll and breakdown. They can also assist with insurance for the fleet.
The backbone of the operation is the technology that supports the fleet system.
Services such as management of the full administration including financial reporting, processing of insurance claims and attending to licensing and fines administration.
"Our Absa fleet management services really stand out from the rest of the service providers. We have the latest technology and sound support infrastructure to perform this task at the most optimum levels," says Mageza.
"The bottom line is that this service must firstly assist the company to contain costs and secondly add value to the business, which is exactly how we have built our Absa fleet management division.
"We expect further growth in this area as more and more companies see the need to manage and contain costs in a their own respective competitive environments.
"Looking at the corporate and government sector, it is estimated that approximately 1-million vehicles have been outsourced to fleet management companies in South Africa at the present moment.
"Fleet owners wishing to outsource have the opportunity to move their operational and financial risk to our leasing company, as we have the specialist skills and resources to manage this area as cost effectively as possible.
"This frees up capital for investment into other income generating opportunities."