The main motivation for many companies that choose financing is they want to own their fleet vehicles rather than rent; however, it is important to remember, the finance company that holds the lien actually owns each vehicle until they are paid off.
Further, with a loan, equity builds over the course of the finance term; there is no equity at the end of a lease. That said, even though a financed vehicle is considered an asset, its value depreciates. Essentially, over the course of the financing term, the amount of money spent to own a vehicle would exceed its actual value. In general, a business should buy what appreciates, and rent or lease what depreciates.
The biggest benefit of leasing—through the right company—is having access to a dedicated and experienced fleet account manager who will provide all of the assistance discussed above. He/she can also offer fully equipped, work-ready vehicles, and provide access to warranty assistance with relevant dealers. An expert can help with vehicle cycling recommendations, whereby suggesting when the optimal time is to replace a vehicle in the fleet—even if it is before the end of the term.
Cost-effective fleet management
With so many enticing options and features on the market, it is easy for a fleet to get out of hand and become too expensive. Identifying areas where money can be saved to improve a business’s bottom line is important. Generally, a fleet account manager can help assemble a fleet that is as cost-effective and efficient as possible. That said, certain steps should be taken within a company to refine its fleet of vehicles to be able to cut back on costs.
The first thing is trying to reduce the number of kilometres travelled. While this is not something that can be controlled easily—after all, the client’s location cannot be changed and it can be hard to govern where employees drive—it is important to consider. Trips with a fleet vehicle that are unnecessary or outside of business purposes can become costly.
There is technology available which can help a business lower these costs. For example, GPS and telematics devices can calculate the shortest possible routes to a location, in addition to discouraging drivers from taking extra trips. According to Fleet Financials, even mentioning the fact a company will be keeping track of mileage and driving habits can lead to better behaviour behind the wheel. It may not be the biggest way to save some money, but it does add up.
Another thing that adds up—which everyone complains about—is the cost of gas. In this regard, some leasing companies offer fuel programs, providing an easy way for businesses to monitor their fleet’s fuel consumption, find inefficiencies and save some money as a result. A typical fuel program, such as Shell’s Fleet Navigator, allows a company to track data accurately about its drivers’ habits and fuel consumption. Activity on each fuel card can be analyzed, limits can be set (if necessary), odometer reports can be accessed, and fuel usage can be managed. Each card has technology to prevent fraud, and the program provides advice on different ways a business can cut back on inefficiencies.
Another money-saving tip is to encourage fuel-efficient driving. The following tips should be shared with employees who operate vehicles within the fleet:
- Avoid speeding, as fast driving is risky and leads to greater fuel consumption;
- Keep tires at the right pressure, which is not only safer, but also increases fuel consumption;
- Minimize the use of air conditioning; and
- Remove any clutter and unnecessary heavy items from vehicles.
However, for this to work, communication is important, so businesses should devise a plan as to the best way to distribute this information amongst employees.
Knowing when to let go
While frequent vehicle replacement can be an unnecessary cost, keeping them for as long as possible can also get expensive. Hanging on to a vehicle that is past its prime economic life will lead to costly maintenance and increased fuel costs. A knowledgeable fleet account manager knows how to pinpoint the most advantageous time to replace a fleet vehicle and reduce its lifecycle cost. That said, a leasing company could help a business set an appropriate timeline for swapping vehicles in the fleet.
Although performing regular maintenance seems time consuming and costly, keeping to a consistent maintenance schedule can also save money in the long-term. Habitually checking the oil, tires, and batteries of every vehicle in the fleet can limit the risks of an incident occurring on the road. For example, oil changes ensure engines work efficiently, and changing to cold-weather windshield washer fluid in the winter will prevent freezing. Regular checks will keep drivers safer, optimize the lifespan of vehicles, and can potentially help to avoid expensive repairs.
Finally, businesses should use all of the data and analytics available to them. When employing GPS, telematics, or any other service that analyzes information and data about the fleet, act on it. There is no point in paying for a technology or service, collecting piles of data, and doing nothing with it. It is already available; therefore, it should be used to identify key inefficiencies rather than let it go to waste. The best way to save money is to change habits and behaviours within the business, and fleet management is an integral component of this.
Chris Carr is an account executive with Quest Vehicle Leasing Services in Toronto, which offers leasing programs for businesses in the pool and hot tub industry. Carr has more than 10 years’ experience in the automotive industry and joined the Quest team in 2017. He can be reached via e-mail at chrisc@questauto.com.
