Providing vehicles for company executives can be a challenging task for fleet managers, who must follow company policy while also considering that the drivers of those vehicles are often the most powerful in the company.
Interviews with several fleet managers show many different methods of keeping the executives happy with their vehicle program.
Executives at Eckerd Corp. in Clearwater, PL service their own vehicles. Eckerd uses coupon books distributed through its leasing company, Donlen.
"All they have to do is use the coupons," said Eckerd Fleet Coordinator Jill Spratt. Executive vehicles are kept in service four years or 65,000 miles, although the years usually come first because the executives mostly travel by plane, Eckerd said.
"They call me when it's time to order a new vehicle," Spratt said.
The current fleet at Eckerd includes 30 executive vehicles. The company gives the executives a choice of an allowance or a selection between the Chrysler LHS or 300M. Eckerd currently has a two-year contract with Chrysler for executive vehicles. Spratt said the models on the selector may change after the two-year contract is up. About 48 executives are on an allowance. The company chairman Wayne Harris, however, drives a BMW740iL.
Executive Vehicle Allowances: Here's How They're Calculated
The most common method of determining what kind of vehicles executives purchase is an allowance system, which designates the maximum amount the company will pay for a vehicle. These amounts vary widely from company to company, and are also dependent on the executive's level. Some companies simply reimburse the executive this amount, but most use the allowance as a guideline for vehicle ordering.
Executives are generally allowed to purchase vehicles that are more expensive than the allowance amount, but they have to make up the difference with their own money. Also, there is usually a cap on the maximum amount allowed, both from allowance money and out-of-pocket money. Often this cap is in place because of insurance purposes.
Allowances are calculated in a variety of ways. Some companies use a particular vehicle as a benchmark, while others base the allowances on income or lease amounts.
"We have a benchmark vehicle, which is a Buick Park Avenue," said Gail Watson, fleet and parking services manager for Nationwide in Columbus, OH. "The officer can select the Park Avenue at no additional cost. If they want to move up to something more expensive than that, we do a payroll deduction for the difference based on the benchmark vehicle."
Computer Sciences Corp. in El Segundo, CA, does not have a selector list for its executives. Instead, it offers a list of suggested vehicles, and the executives are given an allowance, said Fleet Manager Leonie Von Halle.
A lot of the executives put in their own money in addition to the allowances, Von Halle said. Executives keep the vehicles for three years or 50,000 miles.
Von Halle said one of the biggest challenges in managing the executive vehicle fleet is finding the import vehicles requested by the executives. The fleet includes BMWs, Mercedes, Chrysler 300Ms, Buick Park Avenues, and "a lot of SUVs," Von Halle said, such as Dodge Durangos and Jeep Cherokees. Company CEO Van Honeycutt drives a Mercedes S430.
"It's a challenge finding the foreign vehicles out of stock," Von Halle said. "It's a lot of work going from dealer to dealer looking for vehicles. Sometimes the vehicles are in short supply."
In-House or Outsource? An Important Decision
Whether you order your vehicles directly, or outsource your ordering to a leasing or fleet management company, is an important decision that will affect your operating expenses.
"Our leasing company, PHH, handles all our leases," said Shirley Collins, manager, fleet & insurance services for Glaxo Wellcome in Research Triangle Park, NC. "We do the negotiation and paperwork, and send it to PHH, and they put it on lease," Collins said.
Other companies prefer to handle everything in-house. This is particularly effective for companies with fewer vehicles, since it reduces the overhead added by using an outside company.
"We've lowered our costs by doing more of the work ourselves," said Joseph LaRosa, manager, fleet administration, for Bristol-Myers Squibb Co. in Princeton, NJ. "The cost to have the leasing company do everything for you is not cost-effective," LaRosa said.
As manager of one of the largest executive vehicle fleets in the U.S., with 556 executive vehicles, LaRosa manages all aspects of the company's program internally, including ordering and maintenance.
Having a self-contained executive fleet program also allows the fleet manager to interface more with the executives.
"By bringing it back in-house, we're changing the way we approach this by getting the executives more involved and giving them the tools to get more involved," LaRosa said.
Deciding whether to lease or buy is a key part of any executive vehicle program. Because most executives prefer to turn over their vehicles every two years, most companies choose to lease.
"We lease all our cars, both the executive cars and the sales fleet, with closed-end leases," said Beverly Alegria, manager, fleet & travel related services for Foster Wheeler Corp. in Clinton, NJ.
Companies that plan to keep vehicles in service longer, or cycle to other departments, may also want to consider the option of buying.
'Buy American' Policies for Executives Have Diminished
Most companies allow executives to choose any vehicle within their allowance range and cap. While in the past, many U.S.-based companies had "Buy American" policies even for executives, this has diminished, due to the more global business climate today. In fact, at many companies import badges far outnumber the domestics. This can make negotiating a discounted price challenging, since most import manufacturers do not offer volume discounts or fleet incentives. Because of this, most deals are negotiated at a local dealership.
"Most of our executives want import vehicles," said LaRosa. "For imports, we work through local dealerships. I set up the initial relationship with the dealers. I make the initial contact, introduce myself, give them my business card, and ask them to send me a letter of intent."
At Computer Sciences, when an executive vehicle goes out of service, the executive can buy it, or Computer Sciences will sell the vehicle at auction. The executives have equity in the vehicles. If they put in 30 percent toward the purchase of a vehicle, they get 30 percent of the selling price.
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