“When you look at the point in time in a vehicle’s life where the maintenance cost, and a little bit on the fuel side too, starts costing more than the depreciation of the vehicle on your books it generally becomes more costly to keep the vehicle longer,” says fl eet consultant Janis Christensen of fl eet management fi rm Mercury Associates (www.mercury-assoc.com). “Th e old way of buying vehicles and just letting them run into the ground inevitably becomes more costly than replacing them at that point in life.” Furthermore, if aging fl eets on the road aren’t maintained properly, it’s not good for brand image, employee morale or safety, adds John Schwegman, U.S. director of commercial product, General Motors Fleet (www.gmfl eet. com), a part of General Motors that focuses on business cars, trucks, vans and commercial vehicles. When a vehicle is showing signs of age, it starts refl ecting on the company. “Fielding a fl eet of newer vehicles projects an image of success, which helps build brands,” he says. “Newer vehicles also help bolster employee satisfaction, especially when they have technologies such as 4G LTE that help them do their job better, or safety features that make them feel valued and well-cared for.” Other newer features include crash avoidance, rear and side view camera and connectivity options. Schwegman notes that the “pace of innovation is very rapid” in those areas and that just three years ago they were relatively rare. Now, nearly every new Chevrolet, Buick and GMC model off ers them. Unless it’s a personal preference, or a fl eet must work in the constraints of an annual budget – think government fl eets, owning isn’t as “easy” as leasing. LEASING OPTION Because vehicles are deprecating assets and growing in technological complexity fl eet Factors to take into account Too often, a fl eet will choose to own its vehicles because it is not aware of other options available to them that could be better for its operation, says Janis Christensen, a consultant with fl eet management fi rm Mercury Associates (www.mercury-assoc. com). Because leasing contracts are long and detailed, and important factors like interest rates can turn some away, she recommends fl eets visit with a fl eet consultant to learn about leases and to evaluate the costs and benefi ts. Leasing companies, like Penske, Ryder and GM Fleet for example, also offer consulting and customized plans for different needs. There are pros and cons to both owning and leasing vehicles, and it is wise to seek advice and guidance on which approach makes the most sense. Making the “right” decision largely depends on several key factors, consultants say. These include: • Type of operation. • Type of vehicle. • Specifi c application and miles traveled. • Company culture and strategic goals. Even if an option seems obvious, it is best to compare it, fl eet consultants note. FINANCES “From a fi nancial standpoint, high upfront costs are a clear drawback to ownership for some businesses because it means high capital expenditure paid in cash or debit,” says John Schwegman, U.S. director of commercial product, General Motors Fleet (www. gmfl eet.com). “Owning makes sense for businesses that need specialty vehicles, especially if there’s not a strong resale market, or if their vehicles rack up lots of miles,” he says. “Once in service, the vehicles become assets and are depreciated over time. This can be very helpful at tax time. In a lease, the leasing company books the depreciation.” SEEK COUNSEL It’s smart to consider all factors of a fl eet operation, and several leasing companies – including Penske, Ryder and GM Fleet – offer and recommend a consult. Outside fl eet consulting fi rms, like Mercury Associates, also specialize in life cycle analysis. For example, at Penske Truck Leasing (www.pensketruckleasing. com) – which offers full-service truck leasing and contract maintenance, sales consultants work with customers to understand business operations before coming up with a data-driven decision, says Jon Lager, senior vice president of sales, Penske Truck Leasing. They create a comparative value analysis (CVA) of leasing versus ownership to engineer and customize a vehicle and program to meet the customer’s specifi c needs. “Penske shows clients the full cost of ownership, not just the obvious or visible aspects of owning and operating commercial vehicles,” he says. “In addition to acquisition costs, fl eet ownership expenses include ongoing comprehensive maintenance, additional administrative and/or technical staffi ng and vehicle repairs and replacement costs.” Considerations include circumstances, needs and SHORT- AND LONG-TERM BENEFITS. Continued Page 32 Light Duty | VehicleServicePros.com ❚ NOVEMBER/DECEMBER 2016 ❚ FLEET MAINTENANCE 29
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