Mike Antich, executive editor of Business Vehicle Management, Automotive Fleet, Fleet Financial, and Business Driver magazines, offers tips for companies trying to reduce vehicle depreciation losses, select the right insurer, decide whether to lease or buy and establish policies for driving company-owned vehicles.
Depreciation cuts employees appreciate
According to Antich, depreciation eats up half of every dollar spent on a vehicle. Car wholesalers typically bargain hardest knowing they have to add a profit margin to the top.
Employees, on the other hand, are often willing to buy used company cars above wholesale or auction prices but below used retail prices, especially if theyve driven the car and liked it.
Consider the following benefits: By instituting this policy, you provide for your employees a perquisite at no cost, and you reduce the time it takes to sell your company cars. Such a policy tacitly encourages employees to take better care of company cars which they may one day buy.
Employees can also spread the word to relatives or friends who may be in the market for a used car.
There are a few caveats. Set a price between wholesale and retail and stick to that price. The idea is to avoid the used car selling or buying experience. And watch for employees making nonsafety-related repairs on a car shortly before it goes up for sale. Keep close track of all maintenance receipts.
Ensuring your company has the right insurer
Antich provides the following checklist for companies seeking an insurer:
1. Does the provider have a good reputation?
2. Does the provider focus on the companys needs?
3. Does the insurer take the time to understand your business so that it can look for ways to reduce claims?
4. Is a designated contact person provided?
5. Does the insurer offer timely service?
6. Does the insurer have a subrogation program to recover first-party losses?
7. Does the company aggressively investigate questionable claims?
A potential insurance customer should have three questions when considering a policy, Antich says:
1. What are you getting for the cost of your coverage and what are the services provided?
2. How much risk does your company want to assume?
3. Does the coverage adequately protect company assets?
How leasing a fleet releases cash
Leasing executive vehicles allows your company to maintain a more luxurious fleet of automobiles for taking clients out, says Larry Isaacson, a partner in the Michael Silver accounting firm in Skokie, Ill. By leasing, you can drive away with tax advantages.
The ceiling for depreciation tax deductions, he says, is $15,800. In other words, a $40,000 Mercedes-Benz can only be depreciated over the first five and a half years at the same level as a $15,800 vehicle.
If youre going to acquire higher-cost vehicles, you are better off taxwise to lease them, said Isaacson.
Keep your drivers from abusing your license
The easiest way to make employees entrusted with your cars to care about them is to show that you care about them.
When drivers are hired, dont just hand over the paperwork and keys and wish them luck, Antich says. Go over manuals with them and establish a written vehicle policy which clearly defines the following:
1. The companys definition of a good driver;
2. Available driver-paid options;
3. Vehicle maintenance schedule;
4. Incentives and penalties;
5. Accident procedure;
6. Insurance information, including who is covered to operate the vehicle, personal use policies, etc.
Keep in mind, its impractical and insulting to employees to constantly monitor them. Instead, provide an inspection checklist to be filled out weekly. An unannounced quarterly inspection in tandem with the weekly checklist will sniff out egregious offenders.
If your business requires the use of a van, determine the weight and volume of its future cargo. Multiply one unit of cargo by the dimensions of the van.
Most companies end up buying more van than they need, says Jim Harter, a fleet sales manager for Landmark Ford in Niles, Ill. Then they buy an inferior model to keep the payment down. If a vehicle is [purchased based on the correct specifications], it will run out of room before it runs out of weight capacity.
When up-fitting a van, consider these tips.
Be careful not to purchase a half-ton van and then up-fit it to three-quarter-ton capacity, says Steve Leavitt, a fleet manager for Bill Utter Ford in Denton, Texas. Vans without side windows effectively prevent theft, but usually resell lower because the poor visibility usually results in denting. Large side mirrors are a cost-effective way of improving visibility.
How to reach: www.fleet-central.com