Wednesday, 24 October 2012

Another reason Spain is in the mess it's in: How much do its official cars cost?

The red one may not be official
Methods of purchase and finance need to change
MADRID Spain has some 5,000 official cars used by politicians for their official jobs. These do not include work vehicles and daily transport services for government agencies, but they are semi-official figures (there is an apparent reluctance among most agencies to issue the real numbers), which bely the up to 22,500 bandied about on the Internet. In any case, this puts one official car for every 9,438 inhabitants. However, with the latest number for the country's active residents in 2012 at 17,417,300, we get the figure of only 3,483 working people paying for each of these vehicles.COMING SOON: SUBSCRIPTION INFORMATION>>>
Under present financial straits, the Government is beginning the process of offloading a large proportion of these cars or, in many cases, opting for more efficient purchasing processes, fuel consumption and maintenance costs. It is possible to reduce these costs even further, though.

Buying vs. leasing
One way is to improve the way they are acquired. Until recently, most were purchased under the general budgets, but more recently the advantages of leasing or hiring are used for one in three official cars.

Experts in fleet management point out that hiring a car instead of buying it can lower costs by 20%. It is market fact that a vehicle is devalued by 30% during the first year after it leaves the factory, and about 19% per year after that. So we're talking about a devaluation of roughly €8,000 per year for a high-end vehicle, only in terms of amortization. That is without counting on such occasional necessary extras like making it bullet-proof  more or less effectively.

Selling a car such as this is difficult because there is very little demand for a used one. Over the past three years, the crisis has increased the demand for smaller, diesel-fueled, easy-maintenance vehicles, at least in the used car sector, cars that are holding their value better than the opposite end of that market.

One way government agencies have of getting rid of their used vehicles is via auction. But large, petrol-driven, 'luxury' cars over 15 years old hold such little residual value that it is not even economical to put them up for auction. Some regional governments pass them on to smaller public bodies such as councils and other agencies that need them. But, again, the demand is small.

Other costs
Other costs such as insurance, fueling,  MOT-ing and maintenance, among others, don't even figure in these examples. Nor do the costs involved in hiring drivers, training them, or those in equipping garages and personnel to keep the cars in order (which at some point in the past was considered a saving against external costs - these days, however, this is most often outsourced).

Then again, and in addition to the government fleets, there are more costs. So far in 2012, Congress spent €850,000 in taxis and car hire to complement the fleet. The 2013 budget for transporting Deputies amounts to €6,750,000, the same as for this year. This includes transport by train, air, peages, the taxis mentioned above and up to €30,000 in parking fees at AENA airports, where these august personages can park their own private vehicles.

Even more surprising in this last section, is the fact that Congress will be paying for members' parking fines next year, at an estimated cost of €7,000 per year (each?!), which was not included in any of the current estimates.

22 times the number of official vehicles in the US
If the figures above do not make sense, it is not surprising. The fact is that there is no reliable official census from which to get correct information. While the numbers we quote above come from one online source, another says that the Government's own figures put the number at 22,500 (see the first paragraph). Of these, 864 belong to the Central Government, 11,000 to councils, 9,200 to Regional Governments, 1,200 to Provincial Governments, and the remaining 300 to what it calls 'supra-municipal' entities such as Mancomunidades. (See: Too many administrative layers.)

This same source breaks the costs down as follows:

  • Fuel; €58,000,000
  • Personnel: €810,000,000
  • ITV (MOT): €1,080,000
  • Insurance: €45,000,000
  • Cost of vehicle: €202,000,000
These figures do not even include such necessary items as cleaning, maintenance, etc. etc. True, one can make anything of statistics, but the above are based on the conservative estimates of an economist who works in Madrid as head of the Asociación Profesional de Recursos Humanos (Association for Professionals in Human Resources, associated with the central government, and using government figures)

In any case, and whatever numbers we choose to believe, here's an interesting comparison (though we don't know the source of the figures here, either): The United States has only 412 official cars, for the White House, Congress and Senate. That's in a country of some 300 million inhabitants. Spain has not quite 50 million.

The Mayor of New York, millionaire Michael Bloomberg, travels on the city's subway. The Queen of Holland is often seen on a bicycle.

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