Roadmap: Rotating Fleet Vehicles
Hans Bodine, CEO - September 4, 2019
For the fourth installment of Carlease’s Roadmap series, we’re focusing on vehicle and fleet rotation, or the practice of cycling out older makes and models for newer vehicles designed to save your business money. Rotation is inherent to the leasing process, with fixed lease terms, vehicles are cycled out on a 1 to 4-year basis, but it’s harder to quantify when it’s the right time to rotate owned vehicles. And once you do, should you purchase their replacements, or consider lease options? Thankfully, the leasing experts at Carlease specialize in vehicle rotation, end of lease processing, and remarketing of owned or leased vehicles - and we have some advice to share.
Rotating Your Fleet
Rotating your vehicles is "mission critical" to maintaining a high function fleet for your business. When you have vehicles in the active rotation that are under performing, your business is losing time, money, and (potentially) clients. That's why developing a vehicle lifecycle strategy for your fleet should be done early and reviewed often, helping you keeps costs down and your drivers on the road in safe, effective vehicle. But as you're building this plan, it can be hard to know when it's the right time to rotate your fleet - there are no hard and fast answers! Here we share some key strategies that you should implement to help you plan an effective fleet lifecycle.
1) Know Your Business - It should go without saying that the better you know your business and your industry, the better positioned you’ll be to recognize when rotating your fleet can benefit your bottom line. Take, for example, the construction industry. It’s important to monitor the seasonal shifts in your business to time vehicle rotations to hit before your peak busy season. That way you’re able to keep your best vehicles working for you, while phasing out some aged models that are underperforming and costing your business in maintenance and repair fees, and quickly upgrading to newer, high performing models. Attempting vehicle rotations during peak busy season comes with its own set of challenges, so keeping an eye on the calendar and industry trends can save your company a lot of hassle. Additionally, the better you know your industry and the needs of your drivers/crew, the easier it will be to identify when vehicles are not meeting the day to day needs of your workers. Speak often and take note of vehicle performance.
2) Monitor Your Fleet - Thanks to the abundance of new fleet tech on the market, monitoring your fleet has never been more affordable or accessible. Fleet fuel cards, maintenance reports, telematic backed driver records, and vehicle performance metrics all paint a picture of the overall health of your fleet. You can now track each vehicle individually against overall fleet performance and across industry standards. This allows you to pinpoint when a vehicle is underperforming and may be ready for a rotation out of service. And it’s no secret that driver behavior affects the health of your fleet. Erratic behavior, quick breaking, and speeding cause undo wear and tear on your vehicles and can significantly shorten their useable lifespan. With driver monitoring programs, you can work as a team to better care for your fleet and extend the longevity of your vehicles.
3) Monitor Industry Trends - Different makes and models of vehicles maintain their value differently. This is part of the reason why it's often more economical to lease a newer model vehicle than an older one - because when the lease ends, the residual valued of the newer vehicle is higher, i.e. it’s held on to more of its value than an older car of the same model/make. Knowing which makes and models are trending can also make a big impact on the ease of your fleet’s rotation. Makes and models in high demand don’t sit idle for long. Noting different trends with gas, diesel and EV vehicles can also benefit your business.
4) Monitor Resale Markets - Remarketing and auction data is readily available online and can help you make an informed decision on when to rotate your fleet. Pinpointing the right time in the vehicle’s life, and the right time of the year to sell can yield your business a greater return than blindly cycling vehicles in and out of rotation. Some data even suggests that when done appropriately, business can earn up to 5-10% more per vehicle than they otherwise would, especially when using a trusted fleet managing partner with industry experience - like Carlease.
It’s easy to rattle off anecdotal evidence about the benefits of vehicle rotation, and how costly it can be to keep old, underperforming vehicles in active use - but let’s take a look at some quantifiable case studies done across the county.
The first example comes to us from St. Lawrence County in NY. Thi Dao for Government Fleet writes “When [the government of] St. Lawrence County in New York decided to lease its fleet of 24 vehicles [and retire their older models], they cut their maintenance costs from $30,000 to $2,000 per year and fuel costs from $50,000 to $25,000 per year.” That’s a yearly savings of $53,000.
A police force in Prattville, Alabama experiences a similar savings, writing “Approximately three years ago, Prattville Police Department began replacing police cruisers with SUVs. Police Chief Mark Thompson has analyzed PPD's fleet, prioritizing replacement by mileage, age, and the amount of maintenance costs for each vehicle. Those vehicles with the highest mileage and highest maintenance costs were replaced first. Over the past year, this move has reduced maintenance costs for the department by $20,000. The Police Interceptor Explorer SUVs get 15 miles per gallon (mpg) where the older vehicles were getting 11 mpg, so there has also been a reduction in fuel costs.”
When financial resources are tight, prioritizing which of your fleet vehicles should be replaced can be challenging. However, for businesses that lease their fleet vehicles, the rotation cycle is decided early - by the length of your lease. Which is why it’s never too soon to think about the future of your fleet. And Carlease can help!
Working with Carlease
If this all sounds like a lot to think about… it is!
And while it’s not be easy to navigate fleet rotation on your own, you don’t have to. The leasing experts at Carlease are here to assist in building a high performing fleet for your business, complete with the ideal rotation plan designed to get you the best deals when your lease is up. Do you currently have vehicles in your fleet that you’re considering rotating? Your Carlease specialist can help analyze your current fleet to determine if it’s time to rotate, and help you established age and mileage criteria, and a repair/maintenance threshold for existing vehicles.
When you work with Carlease, you can be assured that you're getting the ideal lease plan for your business, at a price that's right for your budget. And Carlease works across all makes, models and lenders to ensure our clients are getting the best deals at the lowest payments. When you’re ready, our leasing specialists are standing by to answer your questions.
Interested in your business's fleet readiness? Take our assessment! Our leasing specialists provide insight and advice based on your business's unique challenges.
Interested in our Roadmap series? Visit the links below:
Roadmap: Plan and Build Your Fleet