BY KASH MORGAN
ASSISTANT VICE PRESIDENT OF PARTNERSHIPS
ENTERPRISE FLEET MANAGEMENT
Too often, fleet management strategies revolve around a simple strategy: Buy a vehicle at the best price, pay it off, then drive it until the wheels fall off.
To measure what owning a vehicle fleet really costs – and maximize dollars – businesses must do more than calculate the amount paid for the vehicle at acquisition or the interest rate on the loan. With a vehicle fleet typically ranking among the top five business expenses, organizations should closely examine their fleet-related costs to get the most bang for their buck.
For example, Parrish Construction Group, Inc., a full-service construction management firm and AGC of Georgia member, did not have a consistent way of acquiring vehicles and was experiencing fleet growing pains as their business grew. The management team was spending excessive time handling buying and up-fitting vehicles with limited controls in place to track and manage vehicle expenses.
As a result, Parrish Construction looked to Enterprise Fleet Management to create a proactive vehicle replacement plan to include maintenance and insurance to allow for better control and consolidation, all while creating efficiencies and improving company image.
“Enterprise Fleet Management has been an incredible partner for our company,” said Sara Murpj, chief financial officer, Parrish Construction. “With over 100 vehicles on the road, our fleet is one of our largest assets and largest risks. Enterprise has helped us manage the details of our fleet program by helping us maximize value through cost-effective scheduling for vehicle replacement, tracking of fuel efficiency and repair costs, and their platform for recordkeeping of our fleet. In addition, their maintenance program ensures that the vehicles we have on
the road are well maintained and highway ready. I highly recommend working with Enterprise Fleet to help you manage your assets and mitigate your risk.”
The local Enterprise Fleet Management team brought its full expertise to the table, consolidating Parrish Construction’s fragmented management programs into one comprehensive fleet management plan.
Over a three-year period, Enterprise Fleet Management successfully cycled Parrish Construction’s entire fleet by implementing a strategic plan. As a result, Parrish was able to order directly from vehicle manufacturers, leading to average cost savings of $2,000 per vehicle and a more uniform fleet. Enterprise also implemented a comprehensive maintenance program, resulting in annual savings averaging $490 per vehicle. This allowed Parrish to manage their fleet more efficiently while reducing overall vehicle expenditures and freeing up time for managers to focus on their core business.
To achieve results like these, it is important to identify the top four expense drivers for fleets and provide insights on how to evaluate them to optimize vehicle cycles, which include the following:
Depreciation
Depreciation occurs when the amount paid for the vehicle is less than what it sells for when taken out of service. Depending on the types of vehicles in a fleet and their mileage, the value of a new vehicle can drop by 20% or more in the first year of ownership. It’s a common misconception that running vehicles for 10+ years is more cost-effective because the vehicle is paid off. The reality is that older vehicles continue to lose value every month, which is effectively the same as making a monthly payment on those vehicles.
The easiest way to reduce depreciation is to find the best time to sell the vehicles in a fleet. With a properly timed cycle point, companies can sell their vehicles when they still have significant value and invest the surplus cash into a replacement vehicle or other business needs.
The best way to determine this optimal cycle time is to assess best-in-class data on an annual basis. When deciding which vehicle types and manufacturers to choose, pay special attention to fleet and custom incentive plans, as well as residual values of the vehicles.
Maintenance
Vehicle repair prices have increased by about 20% in the past year, according to the June 2023 consumer price index. Unscheduled vehicle maintenance needs cost both time and money. And unexpected repairs are needed more frequently when vehicles are past their optimum life cycle, requiring more frequent and more expensive work.
As is the case with depreciation, the best way to minimize maintenance and downtime expenses is to identify the optimum cycle point for vehicles. By selling a vehicle before it becomes a major problem, companies can take advantage of higher resale gains and more predictable maintenance expenses.
Fuel
Fuel is one of the greatest costs for a vehicle fleet. While there is little control over gasoline prices, fleet fuel expenditures can be reduced by implementing a fuel program. Detailed, custom reporting tools provide insights to make informed fuel purchasing decisions. As fuel prices continue to rise, finding ways to control fuel costs is more important than ever.
Adopting a telematics program for a fleet is another way to reduce fuel costs. For example, Enterprise Telematics provides real-time data for vehicle and driver performance, route changes and fuel usage. Additionally, a telematics program can track idle time – an important consideration because higher idle time results in higher fuel costs that are often unnecessary.
Another way to reduce fuel spend is to make sure a fleet is the best fit for your business. Removing underutilized or problematic vehicles in the fleet can cut costs. By replacing older units with newer, more fuel-efficient vehicles, companies can see a reduction in total fuel spend by as much as 10% per vehicle.
Mileage Maximization
Identifying the optimum cycle point is the best way to ensure a fleet is operating at the lowest possible cost. By doing so, companies can minimize depreciation by taking advantage of higher resale gains, avoid costly downtime and maintenance repairs, reduce fuel spend and lower their carbon footprint by using more fuel-efficient vehicles.
All budgets and fleet needs are different. Partnering with Enterprise Fleet Management can provide a customized solution for each client’s specific needs. You just might find that you have more control over your fleet costs than you thought – without sacrificing quality
or flexibility.
Kash Morgan is Assistant Vice President of Partnerships for Enterprise Fleet Management,
a full-service vehicle management business and affiliate of Enterprise Mobility. In her role, Kash is a trusted advisor helping associations and their members by supporting their mobility needs, delivering exceptional value through unparalleled resources and an unwavering focus on members’ priorities.