Pricing Employee Sales: Should You Negotiate?
It is an axiom that selling fleet vehicles to employees is a critical part of managing depreciation. Fleet managers use a number of methods to determine price, but should they be willing to negotiate?
Ask most experienced fleet managers how they maximize resale proceeds, and, therefore, minimize depreciation, and somewhere in the answer they’ll mention selling vehicles to employees.
It’s a tried-and-true solution; employees are a “captive” market, fleet managers can provide them with pricing they can’t achieve in a retail market, and transactions can be completed quickly and easily. But, fleet managers must establish a pricing regimen, a method to quote employee pricing. What happens, then, if drivers resist? What if they don’t like a price, and pass on the purchase? Should employee pricing be negotiable?
For a long time, many fleet managers left vehicle sales to their lessor, or managed the sales themselves via wholesale options, such as auctions, wholesalers, and brokers. Little by little, the idea that vehicles could be sold to a driver (initially) began to take root. Fleet managers saw the benefits of selling to drivers, which included:
● Faster sale equals faster application of proceeds: Driver sales could be completed when the new (replacement) vehicle was picked up. The faster proceeds are applied, the faster the TRAC adjustment will appear on the billing.
● Lower prices: Fleet managers can price vehicles at levels above traditional wholesale outlets, but below what drivers are able to get in a retail setting.
● Better care: When drivers know they are able to purchase a vehicle when it is taken out of service, they are more likely to take better care of the vehicle, such as getting preventive maintenance performed on schedule and minor repairs and cosmetic damage taken care of. Better condition means better and more cost-efficient operation.
Soon, this internal, captive market expanded beyond just drivers to other employees as well. Expanded markets and more potential buyers led to more vehicles being sold at better prices.
With the advent of the Internet, non-traditional markets expanded further. Fleet managers and fleet management companies created “virtual used-car lots,” where vehicles for sale (and coming up for sale) could be posted, with photos, pricing, and even access to preventive maintenance records. Fleet managers and their suppliers moved on from just selling vehicles to employees to actively marketing them. Rather than just quoting prices when asked, many fleet managers began to provide pricing for every vehicle being replaced, along with ancillary products and services to facilitate the sales. Financing, leasing, and extended-warranty programs all took their place in the process. The bottom line was that these new markets enabled fleet managers to get better prices and sell vehicles more quickly. Both help reduce fleet costs.