Rising fuel costs and budgetary constraints on new-vehicle acquisitions have prompted a growing number of companies to ask their fleet managers to investigate the feasibility of downsizing to less expensive, more fuel-efficient minivans and compact pickups. What compounds the downsizing decision is the generally more-specific functions of fleet trucks and vans, as compared to cars. The load weight, bulk, composition, upfitting time, and expense require a significant analysis to determine whether a minivan can be substituted for a van, or a compact pickup for a full size. The key question becomes: do the savings in operating expenses (as well as fixed costs) justify the change?
The Selection Process
Vehicle selection is an elementary fleet management process. Much like hiring a new employee, a “job description” must be developed, the candidate’s qualifications for the job evaluated, and the cost negotiated. For the most part, autos are “people movers”— their primary function is to transport employees and passengers from point A to point B; thus, selection options are plentiful. Trucks, however, must fit their mission more closely. Four people can be transported in a compact car as reasonably comfortable as in a full-size car. But a truck required to carry a ladder, tools, equipment, and heavy loads requires more stringent qualifications. Cars are more often “chosen;” trucks are “engineered.”
The Cost Considerations
The two primary cost categories in running a fleet are fixed cost (primarily depreciation) and variable cost (fuel, maintenance/repair, tires, oil). All of these expenses must be considered in the decision to downsize from a full-size van to a minivan, or compact pickup from full-size pickup. In 2003, Automotive Fleet, the sister magazine of Fleet Financials, published its annual operating cost survey, which revealed that full-sized vans are kept in service 50 percent longer than are minivans (an average of 57 months versus 38 months). For that reason, the net cost-per-mile (CPM) is 48 percent lower; dollars per month is 21 percent lower (minivans average more mileage). At first glance, it would seem that downsizing would actually increase fixed costs, but this can easily be misleading. Minivans often perform a dual function— carrying both people as well as loads. They are more often used in a sales marketing or merchandising role, as opposed to the utilitarian mission of most full-sized vans. Therefore, minivans are usually replaced on a “car” cycle, full-sized vans on a “truck” cycle. A valid option then, is “beefing” up a minivan to handle a more rugged mission, and keeping it in service longer. The result is lower depreciation, enhanced further by a lower original cost. Variable costs, however, are another, very different matter. The Automotive Fleet survey revealed that minivans are cheaper to operate at all mileage intervals than full-size vans, particularly above 48,000 miles. The survey for variable costs shows expenses at three increments: less than 24,000 miles, 24,000-48,000, and 48,000-80,000 miles. Most of the cost difference is in fuel and tire expense. Assuming that the impact of extending replacement is the same on minivans as full-size vans, lower overall variable expense would provide a level of savings, though likely not as significant as the survey data shows. For example, a beefed up minivan, carrying a more substantial load, would not be as fuel-efficient as the typical minivan represented in the survey.
Pickup Truck Deliberations
The Automotive Fleet operating cost survey does not provide separate data for compact and full-size pickup trucks. A reasonable conclusion, however, is that compact pickups, usually powered by six-cylinder engines, achieve better fuel efficiency than full-size models equipped with eight-cylinder engines. Tire, maintenance, and repair expense would also be lower, on the smaller vehicle. Since it is common to replace both compact and full-size pickups under the same criteria, overall depreciation, due to lower capitalized costs, should be slightly lower for a compact pickup. Thus, a fleet that replaces full-size pickups with compacts should achieve the desired cost savings.
The Big Question
Now for the big question. Most of the arguments outlined above are contingent upon all things being equal, that is, the assumption that the smaller vehicle can do the job. This question must be answered before a downsizing process can proceed any further. As stated earlier, the mission of a minivan is often not identical to that of a full-size van. Minivans more often perform duties similar to those of cars, primarily carrying people and smaller loads. Full-size vans either carry more people (livery), or, more often, transport larger, heavier loads of product and equipment. Full-size vans are also more frequently upfitted. The decision to downsize vans therefore is more complex. Several critical questions, and subsequent analysis, must be answered when determining the feasibility of using smaller trucks or vans: ∑ What load must the vehicle carry? ∑ How many people will ride in the van? ∑ Can the smaller truck or van be strengthened to perform the same or similar function as full-size models? ∑ Is it possible to change the mis- sion or alter the load factors to accommodate smaller vehicles? Passenger and load-carrying capacity are relatively simple to assess. If a van is used only for delivery/service applications, passenger capacity is not really a factor. A full-size load van capacity is significantly greater than minivans. How close to that capacity is a van normally loaded? Often full-size vans are used simply because they’ve always been used. In such cases, downsizing is easier. The drivetrain factor is important here in converting full-size vans with partial loads to minivans. Fleet managers must make certain that the new unit has an engine and drivetrain capable of hauling the expected load. If not, savings in fuel and tires may well be compromised. The same holds true for pickup trucks, with the additional factor of topography. Often used on job sites and for off-road applications, pickups carry bulky equipment such as ladders, pumps, and generators. In addition, crew and club cabs are often required to carry job crews (more than one passenger) and the equipment to those sites. Compact pickups can be configured with extended cabs and beds and four-wheel-drive application, so the determining factors once again are load configuration and the availability of upfit packages. Putting larger engines, heavier drivetrains, larger tires, and beefed up suspensions into minivans and compact pickups will impact anticipated savings, sometimes significantly. This impact should be considered in the downsizing decision, particularly in light of a possible longer service life. Fuel efficiency will suffer; tires will be more expensive and may require more frequent replacement. The question of changing the mission cannot be answered in a vacuum. Sales, service, and transportation personnel must be involved in the analysis. For example, a delivery application in which a driver must run a regular route might be altered either by reconfiguring the route itself or by providing for reloading from a warehouse or other location.
All Or Nothing?
In many, cases, fleet managers will discover that partial downsizing is a viable option. Some applications simply won’t lend themselves to smaller units; the route is too large, the load cannot be re-configured, or a minivan or compact pickup cannot be engineered to handle even a reduced load. However, downsizing can work for other applications. A partially loaded, full-size van can be replaced with a fully loaded minivan, or a compact pickup can take over for a full-size pickup in some applications. ∑ Be ready to compromise. Accept that some applications can be downsized, and some cannot. ∑ Examine the operation and review the mission. Find instances where the current, full-size vehicle has more capacity than is needed. ∑ Include field sales, service, and transportation management in the process. ∑ Consider that fully loaded downsized vehicle must be engi- neered to handle the job, impacting on anticipated savings. ∑ Be flexible. The decision to downsize isn’t necessarily an all- or-nothing proposition.