Today the criteria for car fleet formation have changed as it is necessary to take into account the imperatives imposed by the new regulations, but also the fact that the notoriety of a company is dependent on choices that do not respect the ecological transition and which drive Can away talent. For a company, choose the most suitable solution to develop the car fleet. Renting, buying or choosing a hybrid vehicle… is not always easy!
In 2021, the implementation of the Mobility Orientation Law (LOM, Mobility Orientation Law) and the development of low-emission zones (ZFE) forced companies to opt for electric and hybrid cars. Companies are faced with a number of regulations and decrees, which relate to automobile fleets from a tax point of view (finance law) and from an environmental point of view. By 2025, all groups with more than 150,000 residents will have to set up an EPZ. The LOM law obliges them to, in fact, acquire 10% of the low-emission vehicles when renewing their fleet from 2022. This “greening” quota will increase to 20% in 2024, 35% in 2027 and 50% in 2030. After Paris, Lyon and Grenoble, it is the metropolis of Greater Paris, as well as eight new cities (Aix, Marseille, Montpellier, Nice, Rouen, Strasbourg, Toulon and Toulouse) that are home to the most polluting vehicles in their city centres. will close the doors. The “Fleets and Mobility 2021” barometer, published by Arval Mobility Observatory, states that companies are accelerating demand for electric vehicles. And 57% of fleet managers surveyed want to adopt an alternative technology, compared to only 30% in 2020.
Several criteria that are required in the choices.
Long term rental (LLD), a standard option
This is no longer a question for large companies that have opted for longer term rentals (12 to 60 months). Outsourcing brings simplicity to management and is positioned as a preferred solution to address the risks that vehicles can carry. If long-term rentals are so successful, it’s because rental companies take care of almost everything! Companies provide services from purchase to sale of vehicle through maintenance, maintenance, insurance, management of dues related to a force majeure event etc.
Activities necessary for the free spirit of entrepreneurs to concentrate better on their core business. Especially when we know the administrative paperwork resulting from accidents or theft if the leader takes care of himself internally managing his car fleet. The principle is simple: the rental company provides new and regularly maintained vehicles for a monthly fee based on the car model and predetermined mileage. For a company, a fixed rent makes it possible to budget and smooth out its expenses over time.
The rental amount is defined in the initial contract and does not vary during the rental period, except for the modification of the material by agreement between the parties. If the company chooses to terminate the contract before the term, it will be subject to heavy penalties. Another disadvantage is that the company that rents the services of a vehicle cannot buy it second-hand at the end of the contract. In terms of taxation, LLD allows deduction of VAT from royalty and rent to be considered as an expense for the company from taxable profits. It should be noted that in order to negotiate, business leaders must support discussions and orders with a limited number of managers. A high purchase volume allows for attractive discounts from manufacturers.
small businesses like to buy
However, even though the long-term rental solution appears to be simple in its operation and management, the sector does not conquer the market of SMEs/SMIs and VSEs, who manage their car fleet on their own funds or credit. prefer to buy more. Same as private persons. A strategy that has its origins in the small size of small businesses’ car fleets and a cultural “background” that advocates for safety when purchasing outside services.
This method has undeniable advantages: the possibility to manage your vehicle, brand, color, and vehicle resale with complete freedom. The Company does not pay any additional costs related to the Rental Package. From a tax perspective, the purchase of a company car, known as a passenger car, is not treated as a purchase of equipment, unlike commercial vehicles or “company edition” cars.
Therefore deductible depreciation is limited and varies according to the CO2 emissions of the car. However the buyout strategy is a double-edged sword for a small company that decides to arm itself with its funds. He should know how to manage his cash effectively so as not to find himself at the bottom of the hold without anticipating the inflows and outflows of his cash registers. A vehicle must also be regularly maintained, and “surprise” costs always come at the wrong time, so a solid cash flow is needed to prevent potential difficulties.
Option: With option to buy medium term rentals and rentals
Medium term rent (6 to 12 months) is not one of the most well-known solutions. However, it responds to topical and specific needs that companies may experience. In this sense, it provides more flexibility to managers facing temporary situations, regardless of the size of the company. This rental method is particularly suitable for hiring on fixed-term contracts or short-term construction sites that require a vehicle to be available.
Lease with option to purchase (LOA) is a special contract that can be offered by car manufacturers, specialized companies or banks. It is the latter who buy vehicles for leasing companies for an average period of 3 to 5 years. The company that opts for this solution wants to retain its assets and not incur insurance costs. Monthly payments are considered deductible expenses and the company does not pay tax on company vehicles (TVS). The main drawback is that the vehicle is subject to a strict mileage that the company must not exceed, at the risk of paying additional tax. The car must be returned at a specific time.
refresh your fleet
The company tends to extend LLD contracts rather than renew the car fleet. The crisis is over. Faced with increasingly reliable vehicles and less number of kilometres, automakers are looking to keep cars longer rather than renew their fleets. Refreshing your car fleet still retains benefits such as benefiting from the latest innovations in technology, but also reducing fuel consumption and CO2 emissions.