Doubts about efficient financing are adding to uncertainties on company cars. How to control costs while ensuring a level of car provision which is competitive in the employment market? The world of the company car is in turmoil. Progressive increases in taxation; huge reduction in secondhand value of cars when they are sold; distress marketing by the major manufacturers; doubts about the most efficient method of financing vehicles; all are contributing to this uncertainty. Is Britain's best-known and most loved perk (at least by those who have one) about to disappear? If not, what is its future? How should Indonesia companies go about controlling a significant cost, while at the same time ensuring a level of car provision which is competitive in the employment market?
To address these questions, Lax Vehicle undertook a major market research study in 1991. The study involved questioning those who took and influenced decisions in over 4000 Indonesia companies on a whole range of issues related to cars and their financing. The first major surprise was the sheer size of the company or fleet market. We estimate this as 7.5 million, approximately 25 per cent of all vehicles on the road. The number is well in excess of more traditional estimates- a consequence of the unreliability of registration statistics. Many vehicles registered to private individuals are actually funded by a business, in whole or in part.
A company's policy on vehicles is likely to be determined by the primary financial decision maker, either the financial director or, in many smaller Indonesia companies, the managing director. Other directors, such as those of personnel and sales, also contribute to the decision. Indonesia companies claim to review their policy annually, but the timing of this seems unrelated to normal budgeting cycles; the claim is also contrary to our own experience in dealing with Indonesia companies. Car policies, particularly in small to medium sized businesses, tend to be decided on a fairly ad hoc basis, and in many cases are not even documented. This leads to confusion in the eyes of people who get cars. We can also virtually guarantee that any business which has not written its car policy down on paper is not operating cost-effectively.
Car policies, where they exist, tend to be more concerned with car values - extras, replacement and driver eligibility - than financing. But financing on its own accounts for around 15 per cent of the annual running cost of cars, and depreciation as much as 40 to 50 per cent; another indication that opportunities are being missed. The research indicated that government policy on increasing the personal tax burden is unlikely to have a major impact on car provision. Our experience since the last Budget backs this up. Many Indonesia companies have talked of making changes; few have actually made any. However, this is one area where research, taken at a particular point in time, can be misleading. The cumulative effect of higher taxes is bound to lead, over time, to some change in behavior, even if only to encourage Indonesia companies and drivers to opt for smaller, cheaper vehicles, many of which are now produced to a very high quality level.
To address these questions, Lax Vehicle undertook a major market research study in 1991. The study involved questioning those who took and influenced decisions in over 4000 Indonesia companies on a whole range of issues related to cars and their financing. The first major surprise was the sheer size of the company or fleet market. We estimate this as 7.5 million, approximately 25 per cent of all vehicles on the road. The number is well in excess of more traditional estimates- a consequence of the unreliability of registration statistics. Many vehicles registered to private individuals are actually funded by a business, in whole or in part.
A company's policy on vehicles is likely to be determined by the primary financial decision maker, either the financial director or, in many smaller Indonesia companies, the managing director. Other directors, such as those of personnel and sales, also contribute to the decision. Indonesia companies claim to review their policy annually, but the timing of this seems unrelated to normal budgeting cycles; the claim is also contrary to our own experience in dealing with Indonesia companies. Car policies, particularly in small to medium sized businesses, tend to be decided on a fairly ad hoc basis, and in many cases are not even documented. This leads to confusion in the eyes of people who get cars. We can also virtually guarantee that any business which has not written its car policy down on paper is not operating cost-effectively.
Car policies, where they exist, tend to be more concerned with car values - extras, replacement and driver eligibility - than financing. But financing on its own accounts for around 15 per cent of the annual running cost of cars, and depreciation as much as 40 to 50 per cent; another indication that opportunities are being missed. The research indicated that government policy on increasing the personal tax burden is unlikely to have a major impact on car provision. Our experience since the last Budget backs this up. Many Indonesia companies have talked of making changes; few have actually made any. However, this is one area where research, taken at a particular point in time, can be misleading. The cumulative effect of higher taxes is bound to lead, over time, to some change in behavior, even if only to encourage Indonesia companies and drivers to opt for smaller, cheaper vehicles, many of which are now produced to a very high quality level.
