Cost to Remarket Fleet Vehicles Increases Over Past Year

Reconditioning fees have increased over the past year. Auction fees and transportation fees have also risen. These increases have caused remarketing costs to increase slightly during the past year. That is according to the latest annual survey of remarketers conducted by Automotive Fleet.

“We have seen an increase in our average reconditioning fees,” said Todd Schreiber, vice president, mar-keting and communications for Associates Fleet Services in Carrollton, TX. “Our average for reconditioning and detailing fees has gone up from $75 to $82.50,” Schreiber said. “Transportation fees have also gone up somewhat, due to the higher gas prices,” Schreiber added, “but the amount is very small, considering how high the prices went.”

Bob Graham, manager, used vehicle sales, for ARI in Mt. Laurel, NJ, agrees. “Transportation is always going up a little each year, because they’re passing on their own internal costs, which keep going up,” Graham said.

Another area that has seen increases is auction fees. “Auction fees have increased during the past year, on average, about 5 percent,” said Todd Norenberg, remarketing manager for GE Capital Fleet Services.

Although there were increases in several areas, remarketing costs re-mained comparatively flat since last year.

Following is a breakdown of what it costs to remarket a fleet vehicle as of August 2000:

Storage Costs: Storage costs for out-of-service fleet vehicles are either deducted from the gross selling price of the vehicle or charged directly back to the lessee. These costs are seldom incurred, but when they are, the average cost is $75 to $100.

Administrative Costs Related to Vehicle Turn-In:These are turn-in-related expenses that are not covered by the lessee’s monthly man-agement and finance fees. Fleet management companies generally negotiate to avoid these fees, but they are sometimes encountered. The average cost is around $50 for services such as vehicle pickup, special title services, and overnight mail service. These costs are often included as part of auction sales fees, but are usually not broken out.

Transportation Charges: Most used-vehicle sellers will incur charges for transporting vehicles from the drop-off point to the selling location. Sometimes this charge is calculated on a per-mile basis, with the average rate being 35 to 40 cents per mile; sometimes there is a flat rate fee, particularly for local moves, which averages around $75.

Vehicle Detail and Clean-up: This charge is unavoidable in re-marketing any vehicle, and is either deducted from the gross selling price of the vehicle or charged back to the fleet. The average cost for these services ranges from $70-$75.

Reconditioning: Reconditioning is needed for vehicles needing repairs that were either unreported, unrepaired, or not performed by the driver. These repairs may or may not be done prior to resale, depending on a fleet’s policy, and the possibility of recovering the investment by obtaining a higher gross selling price. Most remarketers avoid reconditioning costs, which average around $200. Sales Fees: This fee is encountered by all remarketers, and is typically incurred when using auc-tions to remarket out-of-service fleet vehicles. The average sales fee is $90-$100.

Additional Detailing: If vehicles are not sold promptly, the sellers may have to get the vehicle ready for sale a second time. Usually, this just involves re-washing the vehicle, at an average cost of $8-$10 per rewash.

Clerical Processing Costs: Additional administrative and clerical fees that are assessed at point of sale seldom occur, but when they do, the average cost is $30 for such services as duplicating titles and key/send/receive work performed to ensure that titles are accurate and legitimate.

Relocation Charges: On occasion, vehicles are taken to other lo-cations instead of being re-run through the original auction sales site, incurring transportation charges ranging from $225-$350.

Vehicle Appraisal: Although it is not commonly done, some sellers have vehicles appraised by an independent third party when they discover unreported physical or mechanical damage that is contrary to information received from the lessee. The average cost of an appraisal is $65. If all these expenses were incurred, which is highly unlikely, the cost would be $960-$1,055, deducted from the gross selling price or lost as an additional depreciation expense. One way to reduce remarketing expenses is to increase the number of out-of-service vehicles sold to company employees; not only does this bring a higher resale return, but other fees, such as sales and relocation fees, are eliminated altogether.

Another way to reduce resale costs is to minimize above-normal wear-and-tear with a closely moni-tored damage reporting and repair policy. All vehicle damage should be promptly reported to the fleet department and repaired at the time of the incident. Drivers should be educated about the importance of following preventive maintenance schedules, and the effects abusing vehicles have on resale value.

If necessary, a policy that penalizes drivers who turn in vehicles with above-normal wear-and-tear can be instituted.