Fleet Risk Management — Part 2

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We wrote last time about safety and compliance in fleet management because it is the most visible (and legally perilous) part of fleet management. But there’s a second part: purchase, maintenance, disposal, and replacement.

Whether your company makes deliveries, has work vehicles on construction sites, or a mobile service providers, you have to know the best ways to maximize your effectiveness as a fleet manager to ensure efficiency, cost control, and safety (like we talked about last time). We don’t have to tell you how crucial reliability is for putting your best foot forward with your customers.

It starts with how you buy them

There is a rare person who has never purchased a vehicle before, but we’ll cover some basics of how to purchase a vehicle for your company. Here are the bullet points:

1. Define What You Need: We recommend doing this in two parts. The first is what does this vehicle need to do? Examples might be carry tools and crews to and from the jobsite or deliver customer purchases to their locations — you get the idea. The second part is where you start talking specifics: what features are essential to performing those functions? Using the examples above, it might be something like crew cab, work bed with integrated and lockable storage boxes or two-seater van with shelf racks for customer orders and no windows in the cargo compartment. Consider factors such as payload capacity, passenger capacity, and other or special features/equipment needed for your use case (the ‘what’).
2. Do Some Research and Set a Budget: Most people separate these two steps, only to discover that the budget they set before they started researching was way too low and frustration begins. You know what it has to do and what features it needs, so now you can see what vehicles are out there — including going rates for similar vehicles — and who has them. Don’t forget to take fuel economy in account here. [We’ve left out insurance because you probably have a company policy and the new vehicle will increase your premiums and there are too many factors at play to simply say ‘calculate the impact on your insurance costs’ — you should work with your broker early so you get an idea of what those costs could look like.] Determine how much you can afford to spend and whether you need to finance — if you’ve been putting aside money for capital improvements then you can negate some or all of the financing.
3. The Fun(?) Part: Find, Test Drive, and Inspect: Shameless plug alert: we’ve had clients hire us specifically for this part because dealerships spend a lot of money on the psychology of sales, and sometimes a neutral third-party makes a huge difference. If our shameless plug made no impact on your desire to contact us to help you here, then a couple of general rules we suggest: 1) never, ever tell the salesperson your budget. You know what features you want and you know that leather is more expensive than cloth, a plain radio and navigation system is less than suped up audio, and electric vehicles are way more expensive. That, plus your list of needs, are more then enough for them to show you a group of vehicles (they will nudge you towards more expensive ones, of course).
4. Negotiate Terms: If you’re paying with cash, don’t talk about it — it’s best not to discuss how you’re going to pay until you’ve picked a vehicle and agreed on a price. Know that dealers get factory volume rebates, build in fees, and have other mechanisms in place to increase margin — so you have room to push lower without the dealer losing money (don’t fall for the ‘we’ll show you the invoice for the vehicle’ gimmick).

If you buy it, you’ll have to maintain it

Proper maintenance is essential for keeping them running smoothly and minimizing the risk of breakdowns or costly repairs. Here are some tips for maintaining your fleet vehicles:

1. Follow the Manufacturer’s Guidelines: Pretty simple, but most people don’t take the time to read the actual guidelines. Most people just think of changing the oil every 3,000 miles. [By the way, a lot of vehicles now have programmed maintenance that is longer than 3,000 miles — one of our vehicles, for example, is 7,500 miles between oil changes.]
2. Preventive Maintenance (actually do it): In addition to following the manufacturer’s recommended schedule, implement a preventive maintenance program to proactively identify and address potential issues before they escalate into more significant problems. This may involve regular inspections, tune-ups, and component replacements based on mileage or usage patterns — the more miles you put on a vehicle, the more often you need to do this.
3. Keep Detailed Records: Maintain detailed records of all maintenance and repairs performed on each vehicle in your fleet. This includes dates, mileage, services performed, parts replaced, and any associated costs. This information can help you track expenses, identify trends, and ensure that each vehicle receives the necessary maintenance on schedule — plus, when you eventually dispose of the vehicle, your potential buyers will feel better about a vehicle you can prove has been well taken care of.
4. Train Drivers and Staff: If you don’t have a dedicated maintenance team (or a regular mechanic you work with), then be sure to provide training to your team on proper vehicle maintenance and care practices (this includes checking fluids, tires, warning lights, and reporting any issues or concerns to you promptly).
5. Monitor Performance: Keep track of things like fuel efficiency, mileage, and maintenance costs for each vehicle in your fleet. Use this data to identify areas for improvement, optimize maintenance schedules, and make informed decisions about when to repair or replace vehicles — you’ll usually see a trend of increasing vehicle maintenance costs that can be a leading indicator of when it is time to consider replacement.

Repairing Fleet Vehicles

If you don’t have a dedicated fleet maintenance team, then it’s worth proactively identifying local repair shops. They may not be willing to sign contracts, but those relationships will be helpful if/when you need them — because, despite your best efforts at maintenance, fleet vehicles will eventually require periodic repair due to wear and tear, accidents, or mechanical failures.

Dispose of assets that are old or costing more than they are making

Age and wear will eventually necessitate disposal of the vehicle, because it will begin costing too much to maintain based on the amount of use you expect from it. Here are some tips for selling fleet vehicles:

1. Assess Market Value: It’s worth working with a dealer or professional appraiser to determine the value of the vehicle based on age, mileage, condition, and demand for similar vehicles in your area.
2. Prepare Them Before You Put It Up for Sale: This is pretty standard thing people do before selling or trading a vehicle, but it can make a big difference in the perceived value of the vehicle. Clean and detail each vehicle to improve its appearance and appeal to potential buyers — and try to address any minor cosmetic issues or mechanical problems that could detract from its value.
3. Advertise: If you aren’t going to trade the vehicle (we recommend not using your vehicle as a trade in), then use various advertising channels to reach potential buyers for your fleet vehicles — Facebook Marketplace and Craigslist are pretty common, but you should also consider auto trader-type publications (which may involve a marginal cost). Signs or flyers at your business can help, as well.
4. Be Transparent: When marketing your fleet vehicles for sale, be honest and transparent about their condition, maintenance history, and any known issues or defects — in addition to being the right thing to do, buyers will appreciate your providing them with detailed information and documentation to help them make an informed decision, even if it affects the amount you receive in the sale.
5. Negotiate Terms: Be prepared to negotiate with potential buyers.

Replacing Fleet Vehicles

It’s better to have a fleet replacement schedule so you can dispose of vehicles before they become an urgent need to get rid of them. This allows you to have control over the financial aspects and should be a consideration in your capital improvement plans.

By proactively planning and managing the replacement of fleet vehicles, you can ensure that your business continues to operate smoothly and efficiently with a reliable and up-to-date fleet.

As with most things in your business, doing the work upfront will save a lot of heartburn on the backend — plus helping your business stay healthy and on a growth path.