Although an established remarketing channel, fleet vehicle sales to employees have gained renewed emphasis from corporate fleets. Fleet managers have begun building and marketing new comprehensive internal sales programs that attract increased driver and employee purchasing.

Recognizing the bottom-line value of this remarketing channel, more fleets have expanded in-house sales beyond drivers to other employees, family members, friends, and some companies have opened the sale to the employees of affiliated entities. In addition, fleet management and leasing companies now offer programs to assist and promote employee sales. The development of electronic remarketing tools, particularly Internet technologies, has helped facilitate this remarketing process.

According to John Possumato, CEO,, employee sales have been happening for 30 years, “but what’s changed now in the last few years is the technology that has allowed upstream remarketing big-time: grabbing data details early, with photos, condition reports, and maintenance histories.”

In the past 18 months alone, several fleet management firms have launched new online employee sales programs or introduced enhancements to existing ones, including Automotive Resources International (ARI) with, Donlen’s Employee; Wheels Inc.’s Internet Resale program, LeasePlan USA’s reDrive, PHH Arval’s eValueBuy program, and GE Commercial Finance, Fleet Services with Remarketing Solutions’ Electronic Vehicle Purchase (eVP).

The Automotive Fleet & Leasing Association (AFLA) also provides a forum for members to market off-fleet vehicles to their own or other members’ employees through the Employee Automotive Remarketing Network (EARN).

Everyone Wins with Employee Vehicle Sales
Bill Cieslak, VP of vehicle operations for PHH Arval, sums up the key advantages of employee sales programs: “Everyone is happy - the employee gets a good used car or truck for less than retail, while the employer generally gets higher-than-wholesale prices for all vehicles sold to drivers.”

“Today’s fleet manager has many tools with which to aggressively pursue an employee-sales program. E-mail and intra-company Web sites are great tools to get the word out,” advises Terry Flesia, president of Autocross & Associates, in Irvine, Calif. {+PAGEBREAK+}

Purchase Incentive Option Tied to Auto Safety Program
To enhance employee vehicle sales at Swedish Match North America, Fleet Administrator Marianne Stewart devised a creative plan that integrates a purchase incentive option with the company’s auto safety program.

Part of a global company, Swedish Match North America manufactures and distributes smokeless tobacco products. Located in Richmond, Va., Stewart manages the 371-vehicle sales force fleet with the help of ARI’s leasing and management services. About 25 percent of the fleet is replaced twice a year.

Using the company’s already established Intranet Web site, or portal, Stewart created a new marketing channel, opening up used-vehicle sales to a broader audience of employees, their families, and friends.

“What they receive is the AMR price quote for the vehicle, so it is already a low price. But, as a further enticement, we incorporated a purchase discount-coupon option into our safety program,” Stewart explained. “As individuals meet specific safety-program criteria, they can earn an added discount of 4 or 8 percent off the AMR price.” That criteria includes at least two years’ participation in the safety program and compliance with specific safety practices.

“For the highest discount level - 8 percent - the driver must have a history of uninterrupted, routine preventive maintenance service performed by designated network vendors. They must also have a clean driving record, without any moving violations, preventable accidents, or DMV points assigned to their licenses,” said Stewart. Drivers with the same two-year preventive maintenance history and no moving violations, but with two or fewer points assigned against their licenses, earn a 4-percent discount on the purchase of a company vehicle. The discount is not transferable; only the driver may redeem it on his or her vehicle or any company vehicle coming out of service.

After 18 months, Swedish Match realized an increase of in-house sales. “And the residual we got on those sales is greater than through other remarketing avenues,” Stewart noted. “For 2004, we were back in the black for residuals.” About 23 percent of the company’s used-vehicle sales are now in-house, and that percentage is expected to increase.

Online Program Reaches National Employee Base
For Dave Edenhofer, corporate fleet manager for Los Angeles-based Farmers Insurance, an effective in-house sales program had to be readily available to the employees throughout the company’s national operations, with offices in nearly every state.

Farmers replaces a third of its 6,000-unit fleet each year; most are passenger vehicles - sedans and vans. The company’s replacement cycle is three years or 70,000 miles, although 90 percent hit the three-year limit first, said Edenhofer. Most vehicles are assigned to claim adjustors who travel to locations for depositions and inspections.

Farmers always had a policy for drivers to purchase their vehicles. “In fact,” said Edenhofer, “up until 1996, our drivers were personally responsible for selling their vehicles at end-of-service.” In 2003, the company changed their pricing formula to provide a better value for drivers. Extending sales to other Farmers employees was hampered by the lack of a communications avenue. “They didn’t know who to contact,” said Edenhofer. “We have offices all around the country. Someone in Los Angeles might want a Malibu, but didn’t have the capability of locating one for sale.” {+PAGEBREAK+}

A Donlen client since 1991, Farmers turned to Donlen’s Employee program. “We created a link from the Donlen program to our in-house Web sites, one for employees called Employee Dashboard and the other for our agents called Agency Dashboard. Employees and agents simply log in, register, and obtain their own password to review available vehicles online, with their maintenance records and photos,” Edenhofer explained. “We offer a fixed price, depreciation, plus a mileage factor. And we probably generate a good $200-$300 more per unit than from auction sales, about 120-percent AMR.”

Electronic Bulletin Board Posts Vehicle Availability
Larry Reed, fleet administration manager at International Paper, approaches end-of-service vehicles disposal as a “logical progression” of remarketing channels. With operations headquarters in Memphis, Tenn., the paper and forest products manufacturer currently centralizes its 2,200-unit fleet program, composed of sedans, pickups, minivans, and SUVs. Used throughout the company’s nine business groups covering 36 states, the vehicles are eligible for replacement at the earlier of 48 months or 80,000 miles.

Working with fleet management company ARI, Reed’s first priority with end-of-service vehicles is “to find a home within the company,” extending the unit’s lifecycle by using it in another business group or operation. As a vehicle’s replacement date nears, it is posted on an electronic “surplus vehicle bulletin board.”

If no other business group expresses interest within five days, the vehicle is then offered to the driver for purchase. ARI contacts the driver with price, financing, and extended warranty information. If the driver declines the vehicle, it is then posted to a vehicle bulletin board open to all employees. The board, developed with ARI’s help, is linked to the company’s Intranet Web site.

“ARI determines the used-vehicle price based on a fair wholesale figure,” said Reed. “We don’t mark up the vehicle for employee sales, but we also don’t negotiate. It’s a fixed price.” The International Paper employee sales program has been in place less than a year, and “word is getting out to employees about the availability of out-of-service company vehicle sales,” said Reed.

“To be effective, the fleet manager must be the company’s ‘used-car salesperson,’ believes industry consultant Flesia. “An aggressive used-vehicle employee sales program will return to the company the total cost of the fleet manager’s in-house fleet administration expense many-fold.”

Nine ‘Best Practice’ Steps to a Successful Employee Sales Program

1. Develop a Policy.
A comprehensive written policy must outline the company’s complete program to sell out-of-service vehicles to employees. The policy should be included in the company’s fleet policy manual and posted on the company’s Internet or Intranet Web site. If company vehicles are marketed on a Web site, a link should be provided to this policy statement. At a minimum, a fleet policy on driver/employee sales should include:

  • Timing of vehicle sales.
  • Vehicle listings.
  • Eligibility requirements to purchase vehicles.
  • A marketing program.
  • Policies on repairs and maintenance services performed prior to sale.
  • Warranty details, if any.
  • Pricing determination outline.
  • Financing opportunities.
  • Title and license plate details.

    2. Prepare the Product.

    Start before the vehicle is first put into service. To promote the greatest resale value possible within a fleet program, specification, maintenance, and replacement schedules should all be clearly defined within the corporate fleet policy and diligently followed. Consider allowing company vehicle drivers to order and pay for personal-choice options, which can enhance later sales potential.

    3. Monitor Vehicle Condition.
    Once assigned to a driver, a vehicle’s mileage, age, and condition should be carefully monitored. When vehicles are transferred from one driver to another, obtain a condition report from each driver, compare the reports, and investigate discrepancies. A process should be in place to address mechanical and damage conditions noted in the reports. Upon turn-in, get a final driver report.

    4. Replace Vehicles on Time.
    Replacing vehicles according to fleet policy guidelines helps ensure a better product for resale.

    5. Be Careful with Reconditioning.
    With the exception of safety-related items i.e., brakes, tires, etc., reconditioning will rarely be necessary on employee-sale vehicles properly managed during terms of service (e.g., with preventive maintenance regularly performed). Beyond basic cleanup or normal wear and tear, reconditioning seldom returns the full value spent.

    6. Provide a Package.
    Provide a one-stop-shopping experience for employees by offering financing and extended warranty programs. Used-vehicle financing often can be arranged through the manufacturer or lessor, and independent financial institutions and banks. Manufacturers also offer extended warranties.

    7. Market Aggressively.
    Marketing off-lease (and those approaching lease-end) vehicles, rather than merely selling them, can increase sales at higher prices, while still providing an employee-valued benefit. A price quote should be provided to the driver of every end-of-service vehicle, whether or not the driver requested a quote. Drivers initially uninterested in purchasing the vehicle may be persuaded to do so upon learning the price. They should be offered the right of first refusal, followed by a first-come, first-served sales process. Drivers who decline to purchase should be encouraged to notify other potential buyers, including company employees, family, and friends, of the vehicle’s availability. Advertise the vehicle to internal and external potential buyers in all available communications venues, including company newsletters, bulletin boards, and Intranet and Web sites. Marketing communications should include:
  • Comprehensive vehicle descriptions.
  • Notice of vehicle availability for sale and viewing.
  • Financing and extended warranty information, if offered.
  • Details of sale arrangements.

    8. Simplify the Process.
    Prepare a file of all vehicle paperwork, including title, vehicle condition, and maintenance and repair records, available for easy review by potential buyers.

    9. Work Closely with Lessor.
    If the company fleet is leased, keep the lessor updated on the sales process. As the titled owner, a lessor’s cooperation is important in the timely transfer of paperwork, including titles and bills of sale.

    How to Price Vehicles for Employee Sales
    Pricing is the most critical element of a strong employee-sales program. According to Jim Anslemi, director of fleet and travel for Lorillard Tobacco in Greensboro, N.C., “a professional fleet manager should be just as concerned about what they can sell a vehicle for as they are about the original purchase price.”

    Employees inevitably compare a company vehicle with a similar vehicle they may buy in the retail market. This comparison holds the key to the program’s success of the program. End-of-service vehicles can be offered at a price higher than wholesale, but lower than retail, and still provide a benefit to the purchasing employee and improved returns for the commercial fleet. This practice is often termed “wholetail” pricing. To accurately price vehicles for employee sales, an understanding of both the wholesale and retail markets is necessary.

    Jay Fahrendorff, managing partner, ABC-Minneapolis, LLC, in Dayton, Minn., says “the hardest part is constantly monitoring the current wholesale environment so that you are sure that the aggressive employee pricing is high enough to compensate for the cherry-picking and yet low enough to entice the driver to buy.” He advises monitoring maintenance histories when possible to prevent underpricing a vehicle that has been overmaintained by the driver in anticipation of purchase.

    Some fleets allow drivers to buy additional options when the vehicle is ordered. If the upgraded equipment enhances the vehicle value and the driver is interested in purchasing it, the value is typically not added to the price. If another employee or third party wants to buy the unit, the price should reflect the upgraded value.

    Several used-vehicle industry publications, including the Automotive Market Report, Black Book, Kelley Blue Book, Manheim Market Report, and ADESA Market Report, are available to help determine appropriate pricing. These resources monitor a full range of vehicle makes, models, and years, providing current market value. Some also offer pricing according to U.S. geographic region. According to Anselmi, “We track our sales very closely and work with the remarketing groups to ensure a consistently high return. Knowing the average AMR that remarketers obtain allows us to establish the same percentage for employee sales. ”

    The fleet management company may serve as the sales entity, dealing directly with the employee-purchaser, for fleets that lease vehicles. This arrangement relieves the fleet manager of pricing responsibilities, eliminating the potential of accusations of impropriety.