A Holman FlexLease interview with Frank Schulz (Co-CFO at House of HR Germany), Majk Strika (Managing Director Europe at Holman), and Diana Leufkes (Sales Manager Northern Region at Holman)

Fleet management: Mr. Schulz, could you please briefly introduce us to House of HR Germany and its fleet structure? What are the special characteristics of your fleet? And how did the first contact with Holman come about?

Frank Schulz: The two German personnel service providers TIMEPARTNER and ZAQUENSIS have recently decided to join forces under the joint parent company, House of HR Germany. Both companies are part of House of HR, one of the largest HR service provider groups in Europe. Through the merger, we seek to combine our strengths and position ourselves as the sixth-largest recruiting and staffing partner on the German market, with the aim of further specialization and expansion in Germany. Investments in digitalization, organic growth, and further acquisitions are at the top of our agenda. Together with my colleague, Hendrik Boa-Adam, we are responsible for the finance department of House of HR Germany.

TIMEPARTNER and ZAQUENSIS currently have around 550 vehicles in use. The vast majority are personal cars, with a focus on brands of the VW Group. In addition, about 20 percent of our fleet consists of minibuses, usually Opel Vivaros. To show the peculiarities of our fleet, we should also look at the situation before 2014: By 2014, the vehicles were fully leased, although the lack of flexibility – especially with regard to shedding vehicles – ultimately led us to switch to a complete purchased fleet. As a sales organization, we also have corresponding fluctuation, so the personal vehicles that were left unused on the lot continued to incur costs. At the same time, we certainly use vehicles longer than other companies, i.e. longer than 24 or 36 months. From our point of view, there is nothing against keeping vehicles that have an annual mileage of, for example, 15,000 kilometers for four or five years. In addition, there were always quite high costs for the lease return due to multi-kilometer billing and the elimination of defects. Last but not least, there were also fiscal policy reasons: We did not have any leasing expenses, due to the purchased fleet, which was reported in the operating result. Instead, the depreciation and amortization of the fleet resulting from fixed assets could be reported below the operating result. This point has become obsolete with the change in IFRS accounting and IFRS 16, in particular, because we have been part of the Belgian House of HR group of companies since 2016, where accounting is carried out in accordance with IFRS.

The topic of remarketing came up in connection with the purchased fleet. We worked with two to three buyers, and Holman was basically our main customer for our withdrawn vehicles. Therefore, there has already been very close and trusting cooperation here. In autumn/winter 2019, Ms. Leufkes also introduced us to the topic of flexible leasing, and we then had Holman analyze the fleet and had various offers submitted to us. In particular, the flexibility to withdraw vehicles when they are no longer needed convinced us of this concept. In addition, we couldn’t find any leasing company in the entire German market that was able to offer us a similar model.

Fleet management: Especially in recent months – also influenced by the COVID-19 pandemic – the call for more flexibility is getting louder and louder in companies as well as among authorized users of company cars. What is the situation at House of HR Germany in terms of employee mobility?

Frank Schulz: The impact of the pandemic was and is particularly visible in the mileage of the vehicles, as employees are in the home office and customer visits have not taken place to the usual extent. Nevertheless, especially for Germany, it can be said that one’s own company car and the need for individuality are of enormous importance, even during the pandemic. Thus, the personal vehicles can be individually configured with us. With our car policy, we give our employees a great deal of leeway with regard to how individual vehicles come equipped. The need for individual mobility has also not changed during this time, if at all, it has increased: Especially in structurally weak regions, where employees have to depend on public transport, we have specifically used our minibuses to protect our employees from possible sources of infection in public transport.

Fleet management: Holman offers a holistic range for fleet customers, from financing to almost all service areas and to remarketing. How can you support fleet managers in their daily work? What services are currently in particular demand among your customers – also influenced by the COVID-19 pandemic?

Majk Strika: Companies such as the House of HR Germany are required to be absolutely flexible in their day-to-day business. The structures in the German leasing and fleet management market, on the other hand, are often very rigid and can rarely reflect the required flexibility. I believe that our approach, which originated in the US, to represent the whole world of fleet management in a single source and in a completely flexible way, is in great demand, especially in view of changed and continuously changing corporate mobility. And this flexibility not only refers to the variable mileage/runtime combinations, but at Holman OpenFlex we rely on a modular principle that includes a wide variety of services and performance over the entire vehicle cycle that can be provided completely uncoupled from other services, on request. In this way, we support customers who, like House of HR Germany, may initially only need our remarketing services, in the same way as companies who may be putting their entire fleet management in our hands.

During the pandemic, many customers had to adapt their fleets to the rapidly changing market situation. This has manifested itself on the one hand in a constantly changing fleet size, but on the other hand also in a change with regard to the mileage of the vehicles. Both scenarios can be mapped via closed-end leasing, but only in connection with costs for the customer. With us, on the other hand, there are no contractual penalties, because our philosophy is to bill services according to actual use. This is transparent and flexible for the customer. If, as last year, a vehicle only achieves half of the mileage agreed in the leasing contract, the vehicle may also have significantly fewer kilometers on the odometer at the end of the contract period, which of course increases the value of the vehicle in remarketing. This profit in remarketing then benefits the customer in our open-end leasing on a one-to-one basis. And it is exactly the path that House of HR Germany has taken with us that serves as a blueprint to answer the question: Why is Holman in Germany? There are customers who have been leasing for years and received great service in doing so, but then they realized that there is a lack of flexibility at peak times by investing in a purchased fleet with capital tied up in corporate mobility, rather than in the areas where the company makes money. And here is where we come in with the open-end leasing concept, which has dominated the US market for 50 years.

Diana Leufkes: Within OpenFlex, we not only offer our customers a truly flexible leasing concept, but we also include a very individual range of services from control to support during the term to the withdrawal of the vehicles. The individual modules are unbundled from other services. This means that if the fleet is leased via FlexLease, for example, you can still fall back on your own or a free workshop network, as the customer wishes. We simply look at how the desired components can be implemented in a cost-effective and efficient framework for our customers and bill them on an actual cost basis – our customers benefit from our purchasing advantages. Nevertheless, you can make use of our expertise as a neutral fleet manager and benefit from the synergies that undoubtedly result from the combination of different components. Our understanding is to always offer the customer triggers, through our experience and the constant scrutiny of the market, as to the points at which costs or effort may be reduced.

Fleet management: Can you use the example of House of HR Germany to explain what is behind Holman FlexLease and how it differs from other forms of financing?

Majk Strika: Basically, at Holman FlexLease, we conclude a financing agreement with a transparent repayment plan. This means, for example, if the customer wants a vehicle that costs 30,000 euros and we conclude a contract for ten years, he pays us an annual repayment of 3,000 euros, i.e. 250 euros per month. This repayment is completely independent of the actual mileage. That’s why there are no excess or unused kilometers in our concept. In addition, we discuss how long the vehicle is actually used: For example, Mr. Schulz tells us that the vehicle will be switched out after six years. We then set up the leasing contract in such a way that the planned loss of value after expiration of the contract reflects the sum of the leasing installments. Nevertheless, the customer decides, similar to a purchased fleet, when it is time to withdraw a vehicle, perhaps because it is technically necessary, or a good price can be obtained on the market. Our remarketing experts basically support this with residual value analyses and also with the actual sale, if desired. After the end of the term, we do not have a reduced value statement, as it does not reflect the loss of value. The vehicle is marketed, with the difference between the remaining debt and the sales value belonging to the customer.

Frank Schulz: As Mr. Strika said, in the end, we only pay the difference between the purchase and resale value for the use of the vehicle in any situation, similar to a purchase situation. Cooperation with Holman is like a partnership on an equal footing. In addition to taking our individual needs and requirements into account, Holman also convinced us in its drafting of contracts. For us, an efficient cost structure has always been important in order to keep the Total Cost of Ownership as low as possible. One aspect of this is the optimization of our insurance costs. We do not require fully comprehensive insurance for our vehicles. For the most part, our fleet is only covered by liability insurance. With classic leasing, the lessor usually requires fully comprehensive insurance on each vehicle. But due to the size of our fleet, we have our own risk spreading, which allows us to dispense with fully comprehensive insurance. This is more economical for us, as the premiums for comprehensive insurance usually significantly exceed the actual costs of repairing damage.

Link to full article: https://flotte.de/magazine/flottenmanagement-magazin/2021/3/5/management/8471/mehr-flexibilitat-fur-flotten.html Journal “Flottenmanagement”, 2021/3, Management