The purpose of this article is to explain that leasing companies’ vehicle fleets pollute less than the average fleet on European roads, both in terms of CO2 and other pollutants; which makes them optimally positioned to support environmental policies. Firstly, it will outline that due to the basic characteristics of leased cars (recent models, engine choice, regular maintenance), they produce fewer emissions. Secondly, it will present the services offered by leasing companies which lead to even lower emissions. In particular, the aim of this section is to show that leasing companies have the tools (and they use them!) to influence drivers’ choice and/or behaviour, thus resulting in lower pollution from cars.
Basic aspects of why leased cars pollute less relative to other cars
Leased cars are on average much younger than the average car on European roads and consequently they emit less exhaust gas, such as CO2, NOx and particulate matter. The average length of a leasing contract (which is an approximation for the maximum age of a leased car) is 4 years. This is to compare with the average age of all cars which is 8 years in the EU-15 and up to 14 years in the new EU Member States (according to the ACEA annual report). Before they are put into circulation, all new cars must comply with European emission standards. These emission standards regulate the emission of NOx, HC, CO and particulate matter in the EU and are revised every four to five years in order to set stricter limits. Hence, for example, a car produced in 2007 must comply with the Euro 4 emission standards which are much stricter than Euro 1 standards valid for cars produced between 1992 and 1996.
Furthermore, owing to continuous technological progress, new cars emit less CO2 than old cars. Between 1995 and 2008, European car manufacturers will have introduced more than 50 new CO2 efficient technologies (e.g. direct injection diesel engines, fast warm-up cooling system, 7-speed automated transmission, regulated electric fuel pump, etc.) and the development of newer technologies is rapid and ongoing.
In summary, leased cars are young cars that are equipped with the latest CO2-efficient technology and comply with the latest European emission standards; therefore they are much cleaner than non-leased older cars.
Properly and regularly maintained cars are safer and emit less CO2. Professional and regular maintenance is a common service offered to leased car users. For example a ‘full-service operating lease’ includes costs of servicing and maintaining the vehicle as prescribed or recommended by the manufacturer, as well as the costs of repairs resulting from common wear and tear. A large share of leased cars in Europe are under operating leasing contracts and are thus likely to be well maintained vehicles, emitting lower levels of CO2 than non-leased cars. Nevertheless, this maintenance effect is not limited to operating leasing, and finance leasing contracts may also include a service component.
Two examples of how CO2 emissions can be reduced through regular maintenance are tire pressure and oil checks. Incorrect tire pressure can result in a three percent increase in fuel consumption. Similarly, low levels of motoring oil deteriorate the functioning of the engine, which can consequently lead to higher fuel consumption and thus higher CO2 emissions.
A significant part of Europe’s latest progress on CO2 reduction was actually achieved through the growing proportion of diesel engines, a move strongly supported by the leasing industry. Due to their fuel efficiency as well as some local specificities, for example in the taxation regime of diesel fuel, diesel cars are likely to have a higher residual value than non-diesels. Leasing companies may therefore offer more competitive pricing for these vehicles, which at the same time emit less CO2 than cars running on petrol. For example in the Netherlands, more than 50 percent of the business fleet consists of cars equipped with a diesel engine, while this is the case in only 12 percent of the private fleet. In the past, the environmental disadvantage of diesel engines was their higher emission of pollutants other than CO2. Nevertheless, nowadays new cars are equipped with the latest technology in diesel particulate filters, with the consequence that diesel engines are cleaner than they have ever been before. As a result, pollution levels of new diesel cars are significantly lower than those of private cars that are older and not equipped with such technology.
Services of leasing companies that lead to lower emissions from cars
In a time of rising awareness of climate change, businesses are displaying increasing interest in environmental issues. The pressure towards corporate social responsibility pushes firms to reverse their negative impact on the environment. For most companies, their vehicles would be the second highest source of CO2, second only to emissions generated through the running of their premises. Therefore, adopting more eco-friendly fleets can lead to lower CO2 emissions and thus better a business’s environmental profile.
Leasing companies can provide their clients with a variety of products that serve as the necessary tools to achieve this goal:
Drafting a green company car policy: Having a greener fleet is becoming an increasingly popular item on companies’ environmental agendas. In fact, nowadays “green” is commonly an attribute of all company car policies offered. Leasing companies have the necessary information and resources to implement a more eco-friendly fleet that takes into account the mobility and cost requirements of their corporate customers. They can draft green fleet policies perfectly tailored to a company’s aspirations.
Selection of vehicles: Leasing companies can provide environmentally conscious companies with unbiased information about greener cars and efficient fuel technologies for their fleets. Through the portfolio of vehicles that leasing companies have on offer, they can positively influence the clients’ choice. Leasing companies tend to decrease the average CO2 emissions of the fleet by offering a broader range of less-polluting cars. Hence, they indirectly influence the clients’ choice towards these cars.
TCO (total cost of ownership) approach as a tool towards lower emissions: The TCO approach is widely used in leasing companies. It means that all costs related to a given car have to be taken into account in order to know the “real” cost of a certain car. Companies buying their cars instead of leasing them often do not know the total costs of their car park, and thus are not aware of the impact of car choice on their TCO. By adopting the TCO approach of the leasing companies, clients automatically tend to choose cars that have smaller engines (implying lower costs) and are fiscally more attractive (this is more and more defined by environmental taxation), thus also limiting the total emissions of their car park. As a result of the use of this approach, the average engine size of leased cars has been dropping for years. Although the traditional misconception that all company cars have big engines still prevails, in reality the majority of leased cars have smaller engines.
Improved travel planning through technology: As part of a green company car policy, leasing companies can provide their clients with software tools that optimise driving planning. Software that serves as an on-board eco-driving monitor can be installed on a driver’s phone or PDA. In that way the driver has indications of optimum speed, taking into consideration meteorological conditions and the type of road being used, indicating the most suitable gear and the expected fuel consumption and CO2 emissions for the planned journey. At the same time, the driver is informed about the topography and traffic conditions of the journey and receives assistance and alert messages based on his/her driving style.
Eco-driving/professional driving training: Leasing companies offer structured information to support targeted campaigns or training programs for drivers to learn how to drive more ecologically and at the same time more safely. This can be done for instance by means of publishing brochures or offering training courses. It is estimated that eco-driving leads to a reduction in fuel consumption of up to 25 percent.
Monitoring tools of progress towards greener fleets: As leasing companies that manage fleets keep record of the fleet’s mileage and consumption, they can easily measure real CO2 emissions and thus substantiate the measures taken towards emission reductions. In this way, leasing companies can for instance compare CO2 emissions before and after eco-driving training and thus have a clear idea about the benefits of such training.
Schemes for offsetting companies’ vehicle emissions: For the clients that are interested, leasing companies are well positioned to put together the needs of a number of customers and arrange offsetting initiatives at competitive conditions, whether through tree planting or market based transactions, through which companies are able to offset the CO2 that their fleet emits. Some leasing companies even apply such initiatives systematically. For example, one leasing company in the UK established a partnership with the National Forest Company, through which for every new car delivered to the customer a tree will be planted.
Leasing companies leading by example and testing new technologies for their clients: Leasing companies themselves are leading by example and include environmental measures in their own car policy. For example, leasing companies offer latest environmentally friendly vehicles to their staff in order to assess these vehicles’ suitability for their clients. In this way, clients can have greater trust in new green technologies that have already been tested by the leasing companies offering them.
About Leaseurope
Leaseurope, the European Federation of Leasing Company Associations, is composed of 47 Member Associations in 33 countries. It represents as an umbrella body the European leasing and automotive rental industries. In 2006, its leasing members accounted for 92 percent of the European leasing market. In April 2006, the Federation integrated short and long term car and truck renters into its membership base. It now represents around 8,500 companies across Europe employing over 200 000 people. During the course of 2006, the companies represented via Leaseurope financed in excess of €297.5bn of new investments in vehicles, equipment and real estate with the portfolio of leasing contracts reaching more than €630bn.
For further information:
www.leaseurope.org