Just like all corporate travel spend in car rental it is important to set down a policy and then monitor the behaviour of the travelling employees at various levels of the organisation. While car rental is one of the lowest travel spend items (typically just 10% of the total travel budget) it can, nevertheless, get quickly out of control unless it is monitored.
The travel buyer
Compliance in car rental starts by identifying a person — travel buyer or a member of the procurement department - who will be responsible to manage the car rental spend once it reaches a certain level (it can be as low as £5,000). Monitoring this spend will allow the company to save costs, shape its car rental package according to its real needs and to create an internal policy designed to limit certain avoidable expenses.
If no one monitors the spend, employees with car rental needs may rent randomly different car groups from multiple car rental firms with different insurance offerings, which can certainly represent a risk for the company. The travel buyer needs to have a relatively good understanding of what to take into consideration when renting a car. Key aspects such as insurance coverage and the different processes the car rental company has in place should not be overlooked.
The policy
If a company with car rental needs is trying to monitor aspects such as rental costs and frequency, it is critical that the employees have absolute clarity on the policy.
The car rental policy will include the vehicle groups employees are allowed to drive, type of insurance, pre-deliveries and weekend use of vehicles, possibility of including other drivers (such as spouses), endorsements allowed, etc. This policy can either be part of a broader travel policy or independent, given the distinctive characteristics of the service.
Some points to consider in the policy.
1. Rental companies use different letters to represent their vehicle groups, hence, using these in a policy can be misleading. However the more complicated ACRISS car codes, which summarise the most relevant characteristics of the vehicles, are mostly aligned. The first letter of the code represents the vehicle size, that can be mini (M), economy (E), compact (C), intermediate (I), etc.; the second letter reflects the number of doors (e.g. C for three or five doors, D for four doors); the third letter specifies whether the vehicle is manual (M) or automatic (A) and the fourth letter differentiates between vehicles with air conditioning (R) and without it (N). Consequently, codes such as MCMN, ECMN, CCMN or IDMR are common in car rental policies. The policy might be governed by the number of passengers and distance travelled, stating, for example, that for solo journeys under 200 miles the cars allowed are CCMN or smaller.
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Car rental is around 10% of travel spend ©Strendyssel/iStock2. Those companies that have fleet of cars need to check if their fleet insurance policy covers rental vehicles. If it does, no additional insurance may be required when contracting with the rental company. In this case, all drivers must be advised that further waivers or insurance should not be accepted. It is not inappropriate to ask the car rental company to ensure that these products are not offered to the drivers at the point of pick up either.
The above point will also govern whether spouses/partners or children of employees are allowed to drive the rental car.
3. If relying on the rental company's insurance, the level of excess on the policy has to be specified clearly. It is also important to ensure that there are good processes put in place for the reporting and invoicing of damage.
4. It may be appropriate to determine which endorsements the company is willing to accept before allowing an employee to rent a car — a close liaison with the internal risk manager will be important. It is good practice, anyway, to do annual or more frequent checks of driving licenses, especially for firms with employees from different countries. There are many portals that check driving licenses automatically such as the UK's DVLA (Driver and Vehicle Licensing Agency).
5. It is also advisable to insist on the fact that when a rental company pre-delivers a car out of business days and times (for instance, a Saturday morning for an early Monday start) the employee should not make a private use of it. Unless absolutely necessary, early morning rental starts should be kept to a minimum when seeking cost savings. The car rental company not only delivers the vehicle but also loses utilisation the night prior to the rental and it is not unusual, nor unreasonable, to charge an "out of hours" delivery which is usually more expensive. Similarly, home deliveries will be costlier than work deliveries, since they are often unmanned and more complex for the rental company.
Who to rent from
The appointed person who will be responsible for the buying and the monitoring of the spend should reach out to different car rental companies in order to find the optimal package. Special SME and large company packages are available from all major car rental firms and contracting one of them can certainly be a cost effective solution.
It is possible (and advisable) to contract a package deal with domestic rates as well as rates in any other country in the world. The package chosen by the company will contemplate the car groups employees can opt for, the inclusion or exclusion of insurance, the type of insurance (if it's included) and all the other aspects of the service required.
Contracting car rental services from only one rental company has a clear benefit: compliance is easier. The selected rental company (or travel management company) can ensure that only certain vehicles are booked and certain insurance is offered.
Contracted rates should be fixed for 12 months (or, sometimes, even longer) so consequently focusing all the spend on one supplier can be the most cost effective package. It also means that all management information is received from one source and in one format, making compliance easier to monitor.
However, sometimes, buying from one car rental provider rather than from multiple providers could be more cost effective for SMEs due to the relatively small budgets probably allocated to car rental. Contrarily, for big companies, renting different mobility solutions from different providers can sometimes be a better choice.
Compliance monitoring
Having contracted the car rental package, monitoring the service is extremely relevant for cost efficiency and optimisation purposes. This task can be fulfilled by the buyer but sometimes car rental companies are able to assist, ensuring that the company's employees can only book certain type of cars (needing further approvals if a different model is required), limiting early or weekend deliveries, etc.
In many cases, car rental companies can be able to deploy dedicated booking microsites to help monitor compliance of vehicle groups driven, insurance and extras taken. Involving the rental company in the compliance monitoring gives travel buyers access to all the key data the car rental company collects such as car groups rented by employees and duration.
The car rental company could also monitor certain situations that could potentially mean a risk for all parties involved. If, for instance, a vehicle is delivered to an employee's address on Friday to be used from Monday and the car is used during the weekend, the insurance may not be valid in the event of an accident.
Tools provided by the car rental company, such as the microsites, and even the use of company credit cards, provide a wealth of really rich data to be analysed and used to better assess the package and, therefore, achieve total compliance.
Monitoring costs
Cost savings on the company's car rental are not only related with rates. There are other key aspects that, monitored and managed properly, can deliver important savings.
Delivery and collection costs of up to £15 are not uncommon and bump up the cost of renting. Therefore, if the rental location is nearby, employees should be encouraged to pick up their car in person rather than having it delivered.
One major corporation noted that the cost of home deliveries was increasing its car rental spend significantly and it did not have guarantees that the line managers and budget holders were checking the cost thoroughly. Although counter-intuitive, the corporate accepted a significant increase in the cost of home deliveries from its rental company, in trade for a lower cost of work place deliveries. When this was pointed out to budget holders, the result was an immediate decrease in the number of home deliveries. The spend on car rental dropped significantly, while the move was also efficient for the rental company.
Monitoring compliance can be split in monitoring risk and monitoring costs, with the former involving insurance related aspects, endorsements allowance, driving licence limitations and more. Although this might be the formal responsibility of the risk management team, the travel buyer should pay close attention to this part of his/her role.