Posts Tagged ‘milwaukee’

Don’t let your vehicles sit idle

Tuesday, April 27th, 2010

When you run a company that solves solutions for people, it is very difficult to watch people around you ignore the very problem that you can fix.  Just this week I was sitting in my office and noticing all the companies around us that have vehicles just sitting on their lot.  This is something that we talk to companies about time and time again but as I scan the handful of businesses just in our neighborhood, I see that the message is not getting out there.

It’s important to point out that vehicles are not like real estate, they don’t retain any sort of value.  As a matter of fact, no matter how great you take care of a vehicle, it is going to depreciate.  So, everyday that a vehicle sits on a lot, it is costing your company money.  I will say that again: everyday that a vehicle sits on your lot, it is costing you money.

Think about that for a second.  Would you pay rent on an office building you weren’t using?  Would you pay an employee that wasn’t working?  Would you pay a phone bill for a line you weren’t using?  Unless there are some extenuating circumstances, the answer will almost always be “NO” but, for whatever reason, companies are willing to let money slide through there fingers everyday by letting unused vehicles sit on their lot.

Most of the time that we see idle vehicles, executives will tell us that they plan to keep the vehicle incase they can rehire, are stuck in a lease or simply don’t know how to handle the situation.  Regardless of the reasoning, it is important to bring in a professional that understands proper fleet management.  This may just seem like a plug for our services but really only a professional will be able to properly asses market value and create a plan to right-size your fleet.

I just request that if you do have vehicles that are not being used on your lot, you at least take some action.  Calculate what the empty vehicle is costing you to sit there and then figure out if it makes sense for your company to remarket the vehicle.  If you need help with doing these calculations, just let us know!

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How smart is the Smart car?

Tuesday, March 30th, 2010

The naming of the car is pure genius.  I mean you would have to be an idiot to not want to own a Smart car.  The fact that you would even consider another brand makes you feel foolish.  Why would they call a car Smart, if it weren’t indeed smart to own one?  Of course, Bill Shakespeare did say something along the lines of “A rose by any other name would smell as sweet.”  Maybe the name isn’t all its cracked up to be.

Now, I’m not saying that Smart cars are bad vehicles.  All I am trying to say is that there are a lot of vehicles that are smart to own.  Furthermore, what is smart for one person to drive may be down right stupid for another person to drive.

The appeal of the Smart car appears to be its gas mileage.  One would conclude a vehicle the size of a go-cart would get pretty good gas mileage.  However, the average Smart car gets around 35 MPG and there are a lot of other options that get the same mileage.  What is great about the other options is that they actually have room for more than two people and a large purse.   The entire point I am trying to make is that purchasing a vehicle, especially for a business, is a complex equation.  It is something that should be carefully considered.

I’m also not advocating that gas mileage shouldn’t be considered.  To the contrary, gas mileage is an important consideration when selecting which vehicle to purchase.  By increasing your vehicle’s MPG by just a few gallons, you can save hundreds of dollars a year.  Check out our Fuel Mileage Savings Calculator to see just how much money you could be saving.  If you are like our customers and have a fleet of vehicles you must keep filled with gas, the savings can add up very quickly.

The trick is to not jump into a vehicle simply because it would seem to have the best gas mileage.  Consider your usage of the vehicle, any possible limitations of the vehicles and what sort of image you want your vehicles to project.  This process may end up leading you to a Smart car, however, any vehicle that you select this way will be smart.

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Avoiding price shopping

Tuesday, March 2nd, 2010

In this economy it is hard to fault price shoppers.  We all want to save money wherever we can, however we can.   Sometimes simply looking for the best price tag can actually back fire.  This is especially true when purchasing a vehicle for your company.

All too often people look for the lowest cost vehicle that will meet their needs and they think they are saving their company money.  However, without understanding the total cost of ownership, this might not be true at all.  Instead of looking at the one time price tag, the buyer should focus on the operational Cost Per Mile (CPM).

CPM takes into account fuel, maintenance and depreciation when looking at the cost of a vehicle.  A vehicle that was inexpensive upfront may not get the best gas mileage, may be expensive to repair and could have a low resale value.  If this is the case, the vehicle that you thought was saving you money is actually costing your company more money than an alternative vehicle.

In addition to helping you purchase the best vehicle for your company, a CPM analysis also allows you to know if a vehicle is operating at a higher cost than it should.  If one vehicle in your fleet has a higher CPM than the rest then it will be important to find out why the vehicle is costing so much more to operate.

Beyond CPM, you also want to make sure the vehicle that you purchase fully meets your needs.  We see a lot of companies that buy their vehicles off of a showroom floor and the vehicle either doesn’t meet the needs of the company or has far more features than is required.  In either case, you will be spending money that does not need to be spent.  Instead, you should focus on building a vehicle that will perfectly fit your needs.

Although it would seem to make sense to simply purchase the least expensive vehicle, you can see that a lot more should go into the decision.  Hopefully this helps you purchase a vehicle that is the best value for your company.

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Do you prefer national or local service providers?

Friday, February 26th, 2010

Earlier this week I told the story of my father-in-law that missed the Daytona 500 because the cable company could not properly service their client (http://www.mayfairleasing.com/blog/?p=49).  I guess this is an issue in our industry as well.  Just this week we met with a potential client that has tried two national leasing firms.  They fired the first one after they mismanaged the account and are in the process of firing the second for the same reason.  As it turns out, they are sick of 1-800 customer service and constantly changing sales representatives.  When this came to my attention I began to wonder if this is something that a lot of people are looking for.  What has been your experience with national versus local service providers?  Which do you prefer?  I greatly appreciate your input!

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Customer service failure

Tuesday, February 23rd, 2010

My family recently made the difficult decision to place my father-in-law into a senior care facility, which can be tough enough when things go as planned.  My father-in-law was placed in a room that he wasn’t well suited for, which in of itself would not have been that big of a deal, but getting the cable switched to a new room would turn out to be a major pain in the butt.

As soon as a new room was selected, we called the national cable company to get the service installed in the new room.  This is where the real difficulties started.

After talking with a handful of associates, probably all outside of the US, it was deemed “easiest” to cancel the current cable service and reorder it for the new room.  This led to the cable immediately being turned off in the old room but no service in the new room.  This was about mid-week and my father-in-law was beginning to worry that he would miss the Daytona 500 on Sunday.  He is a huge NASCAR fan!

Well, after several more hours on the phone, we were able to get the cable company to promise installation on Saturday sometime between 1:00 and 3:00.  Sure enough, Saturday at 2:45 rolls around and there is no sign of anyone to install the cable.  The phone game starts again with several new associates, each having no clue about what the problem was.  Finally, we gave up and decided to address it on Monday.  My father-in-law would have to miss the Daytona 500 because a company was not able to properly serve their customers.

It made me appreciate a great deal more the fact that our company has real people that care about our clients. They’re available to speak with clients personally and empowered to immediately solve any problems that arise.  It doesn’t give my father-in-law back the Daytona 500 but at least I know we are doing things the right way.

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My beef with companies that buy their vehicles

Tuesday, February 9th, 2010

Spoiler alert!   I am the president of a leasing company and, although this may come as a surprise to you, I recommend that all companies lease their vehicles as apposed to buy them.  There, my bias is out in the open.  I still want to touch on this subject though because it is something we see in a lot of companies.  I’ll provide you my biased, albeit very smart, opinion and then you can make a better-informed decision from there.

The first problem that I see with purchasing vehicles is the fact that they are generally left in service too long and incur ridiculously high repair expenses. They are left in service too long because they are treated as capital expenditures.  In most companies this requires a lengthy approval process before those funds are available.  In the mean time, the old vehicle is depreciating and racking up maintenance costs.  Leasing on the other hand forces you to make a decision as the lease term nears, yet still provides you with flexability. This is a perfect example of how leasing helps you maximize the optimal cycling point (http://www.mayfairleasing.com/blog/?p=23).

When companies buy a vehicle they look at the price of the vehicle and not the overall cost.  Sure, you may be able to save a few  bucks upfront buy purchasing a lower- priced model but  are you considering how well it holds its value or will cost to operate?     When you lease a vehicle you are  comparing the total cost of ownership, not just the initial sticker price.

One of my favorite things about leasing is that it is easy.  There are no heavy upfront taxes, intense record keeping or wasted capital.  You simply get a pristine vehicle that will be properly maintained and replace at just the right moment.  As an executive, not even I want to spend a lot of time thinking about company cars.  Leasing allows for a simple, cost effective plan.

Alright, I have ranted and raved enough.  Of course this is an important subject for me but I honestly would not bring it up unless I truly believed it would help companies save money and time.  Hopefully next time your company is considering buying a vehicle you will at least be able to get them to consider an alternative.  Thanks for the ear!

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Holding onto your company vehicles to save money

Tuesday, February 2nd, 2010

In this tough economy we have heard a lot of companies state that they plan to hang onto their company vehicles for longer than they initially planned.  Although this may seem like a great way to save money, the opposite usually ends up being true.

We talked last week about fleet management and what is required to ensure you keep your costs low (http://www.mayfairleasing.com/blog/?p=34).  The week before that we talked about how optimal cycling can ensure you maximize your fleet dollars (http://www.mayfairleasing.com/blog/?p=23).  This week we want to combine these topics to examine the idea of hanging onto vehicles for too long.  Lets look at these two categories:

Maintenance: I want to talk about this because this  should be the most obvious to a company.  Although value of a car continually drops, it is the rising costs of maintenance that is easier to see and feel.  We always recommend carefully tracking vehicle maintenance expenses, but if you do not do this, we at least recommend that you periodically  review the service records of the vehicles and benchmark your expenses to national averages.

What you are most likely to see is a sharp increase in upkeep costs at some point in the vehicle’s life.  When this happens depends on miles and condition.  However, when it does happen your company is no longer saving money but rather loosing money on a car that should be replaced.  If you fall into this category than you are dumping more money into a vehicle than it is worth, not a good idea.

Fuel: I want to talk about fuel next because again, it hits us in the pocket book.   Although 2009 was a decent year for gas prices, it is  predicted that  we will experience future increases.  As gas prices go up, it will be important to have the most fuel-efficient model vehicle that will meet your demands.   The  miles  per  gallon will differ for each company but most certainly newer model vehicles will have better fuel efficiency than their predecessors.

I could continue on with market value and depreciation but I have talked about these before.  What I wanted to do was point out the two ways that keeping a vehicle for another year  can actually  cost money instead of save money.  Just something to think about….

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How long should we keep our company vehicles?

Tuesday, January 19th, 2010

Everyday your employees use them to get to where they need to go.  They hop in and turn the key with little thought as to what the vehicle is costing your company.  However, as a business owner or fleet manager, you know that every mile that your employees put on is an added expense for you.  So how do you keep the cost of company vehicles to a minimum?

The answer is extremely simple: optimal cycling.  Although these words do not mean anything to you now, they should shortly.    Often companies buy a vehicle and run it into the ground because they feel it is the most economic thing to do.   A well structured lease program will actually guard against this and still provide you with all of the flexibility of ownership, plus you will be able to minimize the money you invest in your vehicle fleet, but more on that another day.

So, what is optimal cycling?  Simply put it is figuring out the point in a vehicle’s life where maintenance costs are still low  and your depreciated value and the market value of the vehicle are equal.

Let me back up for a second.  When you drive a vehicle off of the lot you immediately loose market value, which is no surprise.  From there market value will continue to plateau and drop over the life of the vehicle.  Depreciation is similar but the loss in value happens gradually over time.  However, maintenance costs start at relatively zero and then spike and rise over time.  Below is a great slide that illustrates how these three values decrease or increase over time.

The idea behind optimal cycling is to find the exact point in a vehicle’s lifespan where all three values meet.  This is the point in which keeping the vehicle any longer will require you to spend more money on maintenance then the vehicle is worth.  Although you may think you are saving your company money by not buying a new vehicle, you are actually  losing money that could come from the sale of the old vehicle and lease of a new vehicle that does not have the high cost of ownership.

To determine this point in a vehicle’s lifespan requires careful documentation of the vehicle’s history, as well as carefully track your maintenance expenses.  The two key factors to determining a vehicle’s value are mileage and condition.  By monitoring these on a consistent basis you are able to pinpoint, and plan for, the exact moment when you should get rid of the old car and bring in the new car.  And although this may sound counterintuitive, sometimes a new vehicle is the best way for your company to save money.

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How to select the correct vehicle for your company

Friday, January 8th, 2010

How did you buy your last personal car?  Did you buy it off the lot or have it built just for you?  What made you decide on the model of vehicle that you selected?  When you are looking to purchase a vehicle for your business, think about all of those things and then throw them out the window!

The fact of the matter is that buying a car for your company should be night and day from how you personally buy vehicles.  Nine times out of ten when we buy a car for ourselves we rely heavily on emotion, however, if you do this for your business you will end up spending money that you need not.  Instead, focus your decision around four key areas: fuel economy, safety, budget and image.

Fuel economy: When gas prices sky rocket this is usually the first thing that we think about.  However, even with gas prices being relatively low, you still need to think about maximizing your fuel economy.  Even if your vehicles require the carrying of a lot of equipment, you may be able to find a vehicle with a smaller engine or cargo area that will still satisfy your needs.  We call this “right sizing” with our customers and it means finding a vehicle with the maximum fuel economy that will still meet your needs.

Safety: Obviously we want our employees to remain safe but what steps are you taking to ensuring this on the road?  Is the vehicle you purchase ensuring their safety?  For us, being in the Midwest, this often means finding a vehicle that can handle the brutal winter roads.  This could also mean purchasing some extra safety features that may not come on the showroom floor model.

Budget: We often hear from clients that they want to buy the cheapest car they can find to meet their needs.  This is all well and good but what will the upkeep, insurance and fuel costs be with that cheap vehicle?  Often times people will spend more down the road (pun intended!) because they tried to save money upfront.  Also, few fleet managers consider what the resale value of the vehicle they buy will be but this is direct money in or not in your hands! The key is finding a vehicle that will be the best value in the long run, not the lowest sticker price.

Image: This is where things get fun.  What do you want your vehicles to say about your company when your employees pull in to meet a client?  Do you want them to say that you are environmentally conscious, a high-end service provider or blue-collar worker?  Every vehicle tells a story so it is important to know what you want that story to be and then figure out what vehicle will tell that story.  Whether it is what model of vehicle your employees drive or a high-end graphics package, the look of your vehicle can be very important.

So, forget everything that you know about buying a vehicle and focus on these four criteria.  When you do you will find a vehicle that is the best value for you today and down the road.

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