I’ve been in the fleet management business since 1994. My territory includes all the New England states: Massachusetts, Connecticut, Rhode Island, New Hampshire, Vermont, and Maine. I started out in auto rentals in 1992 and then transitioned into automotive fleet leasing in 1994. Since that time, we’ve seen many changes in the fleet industry. Most notable was the introduction of technology and how it has evolved over the years. For instance, when I started out as an Account Manager, we had very little technology in place and business was done via land lines and fax. There were no such things as laptop computers, cell phones, the internet, or GPS! In regards to driver safety, in some ways, this was a good thing because today, easily accessing technology is one of the areas that challenges our customers.
Over the decades we have amassed a library of resources, both internal and external, which help our team and our partners do their jobs with skill and confidence. Peruse these pages for current trends and thought leadership, our newsletters, and tips that we have found helpful over the years. And if you have any questions for us, we’re always here for you.
Since a substantial portion of your overall fleet expenditures goes towards fuel, you might think that with lower fuel prices, your fleet fuel spending would go down. But really, a large part of this expense is controlled by your drivers. Up to about 30% of a vehicle’s fuel efficiency is influenced by driver behavior. So any fuel savings from lower fuel prices can easily be undone by drivers’ bad habits. An ongoing awareness program for your drivers, focused on safety and sustainability, should result in better driving habits that net lower fuel consumption and costs.
As the days get shorter and the air gets cooler, it’s time to think about how to prepare your fleet for safe fall driving. As the seasons change there are new dangers to consider while on the road. Fall means back to school, fall holidays, time and weather changes, and more. Here are the top fall driving dangers and how to prepare your drivers for them.
Reimbursing your drivers for their use of personal vehicles often ends up costing you a lot in the long run. From jeopardizing your company image to liability risks to potentially unhappy and uncooperative employees, there are lots of costs associated with driver reimbursement.
Conversely, outsourcing the management of your fleet can save you money and allow you to feel secure knowing the best choices for your fleet are being made by professionals with experience managing fleets. Not to mention the less tangible benefits of company leased vehicles such as recruiting, employee retention, plus the advertising and branding benefits that aren’t available with drivers using their personal vehicles. To learn more about the dangers associated with driver reimbursement and how to avoid them, check out our brand new infographic below:
Distracted driving is one of the most talked about aspects of fleet management and for good reason. Statistically speaking it’s one of the most dangerous things you can do on the road, a study in the New England Journal of Medicine determined that the risk of an accident caused by cell phone use is on par with driving while intoxicated.
When it comes to company vehicle programs there are a few options available to you. In addition to owning or leasing your fleet of vehicles, you could consider fuel reimbursement. Fuel reimbursement is when employees use their personal cars and are compensated for their mileage.
When it comes to fuel reimbursement plans, there are many hidden expenses which must be calculated and considered as part of a lifecycle cost of a vehicle.
To lease or to own? This is one of the biggest questions a fleet manager will have to answer, and the decision will have major consequences down the road. Although neither choice is necessarily better or worse than the other, they each come with different benefits. Understanding how leasing and owning work is the key to making an informed decision that best suits your business.
Let’s Start with Owning a Fleet
The first thing to understand about owning your vehicles is that, because you own the assets, you own any depreciation that accrues over time. Therefore any damage or general depreciation that occurs while you own the vehicle is incurred by you, the owner.
This can be a good or a bad thing. If the vehicle maintains its value over time, you could resell it for more than expected. But the opposite is also true. You could wind up owning a vehicle with very little value in the resale market. Whatever the case it’s important to be aware that as the owner you are responsible for both the assets, as well as reselling the vehicle at a later date.
Another aspect of owning is the control you have over your vehicles. You get to build exactly the fleet your business needs. This however also means that you do not always have the flexibility that comes with leasing vehicles. Most owners expect to use the vehicles they purchase for a five year period or longer, whereas those who lease tend to have a shorter vehicle turn over rate, and a greater need for flexibility. It’s also important to note that fleet leasing management companies often have programs to provide you with both the control of owning and the flexibility of leasing.
What About Leasing a Fleet?
Leasing comes with a few unique advantages. First of all, leasing allows you to only pay for the usage of a vehicle, rather than accruing depreciation. Therefore, if you cycle through your vehicles in a short period of time, let’s say under five years, leasing may be the better option.
Leasing is also considered an operating expense. These expenses can be written off your bottom line, meaning that there are certain tax benefits to leasing over owning. Another tax benefit is the flexibility of paying rental tax over time versus up-front sales tax in rental tax states (approx. ⅔ of states).
Leasing also ensures that you have one predictable low monthly payment, no upfront fees and the freedom to invest any cash flow in core business objectives rather than having it tied up in an operating expense. If your company frequently needs new vehicles and benefits from flexible cash flow, leasing is the way to go.
How Do You Make a Decision?
Two of the most important questions to ask yourself are:
Where are your vehicles located? What are they being used for?
Companies that are small and localized may be good candidates to own. This is because they are more likely to form relationships with local vendors who can provide benefits on service and maintenance. This is not to say smaller companies can’t lease, or that they can’t benefit from a fleet management company, but simply that many small local businesses are good candidates to own their vehicles.
Owning may also be a good option for service related companies--roofers, painters, AC repair companies. These service companies put a lot of wear and tear on their vehicles as a regular part of their operation. This means the vehicles’ resale value will depreciate quickly. Conversely, if you plan to use these vehicles for their entire life and don’t care about the wear and tear put on the vehicle, owing may be your best option.
Who Gains from Leasing a Fleet?
Some people would say "everyone" but who can benefit the most? Sales and service men often lease. They need attractive vehicles and usually have a high vehicle turnover rate of under five years. Basically they need something new more often, so rather than accruing those four years of depreciation and tying up a lot of time and money in buying and selling vehicles, leasing makes the most sense.
Leasing is also better for national companies. National companies may need maintenance and vehicles anywhere in the country and it’s more efficient to have an expert lease management company handle these needs than to tie up internal resources handling them.
Remember, every company has its own unique needs when it comes to vehicle management. Understanding the benefits of both leasing and owning will help you find the right solution to your business' specific needs.
Be on the look out for our next blog about another option business owners have to get their team on the road--reimbursement.