How to Organize an Effective Vehicle Selector

Offering effective transportation to employees is one of the fleet manager's most critical jobs. The selected vehicles must meet corporate requirements, and be cost-effective and appropriate for the driver's job duties.

The first step in proper vehicle selection is to develop a list of potential vehicles, keeping in mind the vehicle's use, company image, and options or option packages that are offered by the manufacturer. After deciding which vehicles will best suit your company and the needs of your drivers, it is necessary to narrow this list to the vehicles that will be actually selected. One way to accomplish this is by prioritizing the vehicles based on their operating and fixed costs.

Operating costs include fuel, oil, maintenance, and tire replacement/repair expenses. Fixed costs include acquisition cost and depreciation. A vehicle's potential resale value at the end of its service life is another important consideration in vehicle selection. One way to enhance a vehicle's future residual value is to properly spec it at the time it is added to the selector.

Another resale consideration is fleet mix. It is suggested to incorporate a variety of makes and models in your fleet to avoid losses on resale, especially if particular models decline in resale value due to market saturation as a result of an oversupply in the used-car market.

Also, the area of the country the vehicle will be assigned can influence model selection, as could factory fleet incentives for specific models.

Equipment and Options That Affect Resale Value

Here are some suggestions as to the type of equipment and options you might consider specifying for vehicles used for sales or services applications:

• Airbags (driver-and passenger-side when available)
• Air conditioning
• AM/FM stereo radio with cassette
• Anti-Lock braking system
• Automatic transmission
• Bodyside moldings
• Cloth interior
• Cruise control
• Dual mirrors
• Intermittent wipers
• Power brakes/steering/windows/door locks
• Rear-window electric defroster
• Tilt wheel

Options can increase or decrease the resale value of the vehicle. Resale buyers look at mileage, overall vehicle condition, and equipment. For instance, a three-year-old vehicle with a tilt steering wheel and cruise control will well for approximately $133 more than a comparable vehicle without these options; and a vehicle with tilt/cruise, stereo/tape, and power windows/locks/seats will sell for $467 more, according to a recent survey by the National Association of Fleet Resale Dealers (NAFRD).

In addition to resale value, options should be considered from the standpoint of driver comfort and prestige. Keep in mind the image you want your drivers to project and the fact that employees make ideal potential customers for used vehicles.

Steer clear of options that could decrease a vehicle's resale value, such as manual transmission or vinyl seats.

When selecting an engine, you should consider how it will affect a vehicle's potential resale value. A NAFRD study revealed that, in 1991, a two-year-old six-cylinder sedan sold for $655 more than a comparable four-cylinder sedan, and a three-year-old six-cylinder sedan sold for $487 more than a four-cylinder version.

It's also important to note that the resale market doesn't care whether the engine is optional or a base engine. Therefore, while upgrading from a base four-cylinder to a base six-cylinder will possibly increase the vehicle's resale value; upgrading from a base six-cylinder to an optional six-cylinder probably will not.

The engine's fuel economy also should be considered. A smaller engine is usually more fuel efficient; however, if a smaller engine is pushed harder to compensate for its lack of power, it can be less fuel efficient than a larger engine. The maintenance cost should be about the same for smaller and larger engines if the vehicles are given proper care. Determine the initial cost of a six-cylinder engine versus a four-cylinder engine and project the cost per mile for each over the vehicle's service life for comparison purposes.

Color Also Influences Resale Value

Color is an important factor in determining the relate value of a vehicle. According to the NAFRD survey, the colors that were the easiest to sell in 1991 were white, red, burgundy, blue, silver, and tan or beige. Green was the least popular color. You can always limit the color selection to only the best selling colors; however, allowing driver to choose their favorite colors might increase the number of employee purchases once vehicles are taken out of service.

Safety Features Increase Driver Morale

Generally, the larger the vehicle, the safer it is, because smaller vehicles have less structure to absorb crash energy.

The structure of a vehicle can increase occupant safety. Also, an energy-absorbing steering column or a self-adjusting steering wheel can help minimize driver injury in the event of an accident. Some models are equipped with traction control systems, which use wheel sensors to reduce skids.

Airbags and ABS are increasingly becoming standard equipment.

[PAGEBREAK]

Many 1994-model year vehicles offer driver-and passenger-side airbags. ABS is designed to prevent accidents on wet, slippery roads. It prevents the wheels from locking and allows the driver to maintain control of the vehicle and stop safely.

Replace Vehicles During Seasonal Highs

Take advantage of seasonal market highs. Plan orders and replacements in the fall and spring and avoid buying and selling in the summer and winter. Cycle vehicles in October/November to catch the annual high point of the use-car market.

Try to get you vehicle orders in early. Sal Giacchi, director of fleet operations and travel for Lorillard Tobacco Co. in New York, NY, allows for the 10-12 week delivery time. Lorillard has two delivery times; one in March and one in October. Giacchi orders the vehicles for the whole year in August, so that he gets price protection. In other words, he pays the same price for all the vehicles and is not subject to price increases when the second delivery time approaches.

Trucks Gain Popularity on Selectors

A number of fleet managers have had requests from their drivers to offer minivans, sport/utilities, or pickups, on selector lists. Such requests ordinarily are for vehicles priced higher than popular fleet sedans. These vehicles consume more fuel, but return a higher percentage of their original investment. One way to honor these requests is to let the assigned driver have his or her choice of vehicle, but to have the driver pay the cost difference up front.

Aurelie Bain, fleet manager for Marriott Management Services in Buffalo, NY, offers certain assigned drivers the option of choosing a truck-based vehicle in lieu of cars on the selector list, providing they enclose a cash payment with their order.

"We like to accommodate driver preferences where we can, and we also like to have our vehicles preferences where we can, and we also like to have our vehicles equipped with ABS and airbags," says Bain. The amount of cash payment varies, depending on the gap between assigned vehicles costs and the approved alternative.

Another example is McDonald's Crop. in Oakbrook. IL, where Susan Miller is domestic fleet manager. McDonald's fleet of some 2,500 vehicles currently includes about 250 light trucks and vans. At the mid-management level, which includes managers of company-owned stores, the standard fleet can is a Taurus sedan. Because many drivers want trucks, and also want to purchase their vehicle after 48 months or 50,000 miles, McDonald's decided two years ago to allow truck alternatives. Thus, for about $1,000, an individual can have an Explorer - or perhaps $3,000 for a fully-equipped Eddie Bauer model. The payment covers both the higher price of the vehicle and higher expected operating cost.

According to Miller, this program is very popular with drivers, and has resulted in well-maintained vehicles for the fleet.

McDonald's also permits drivers who select Ranger pickups to have aftermarket caps must stay with the vehicle when remarketed. Miller says, "ABS is a must in our fleet" to accompany whatever else drivers prefer. Although the alternative choice program hasn't been in effect long enough for such vehicles to be recycled, Miller is confident many present drivers will purchase these vehicles when such opportunity arises.

Using EPA city ratings for vehicles with automatic transmissions, and figuring fuel cost at $1.10 per gallon, the difference between a 3.0L Taurus sedan and a 4.0L Aerostat *** is $688 more than the Taurus.

10 Steps to Developing a Vehicle Selector

1. Develop a list of potential vehicles to be considered for inclusion on the selector.
2. Determine the vehicle's use and eliminate vehicles that aren't practical.
3. Consider driver needs - safety, comfort, reliability.
4. Determine vehicle options and decide whether to allow driver-paid options. Spec options with depreciation and resale value in mind.
5. When pricing out the vehicles, do so with models that are comparably equipped.
6. Analyze availability of fleet incentive programs by model.
7. Compare fuel economy and maintenance costs by model.
8. Anticipate driver acceptance of considered models.
9. Consider the importance of corporate image.
10. Don't be afraid to shop around for value and service.

Why Some Fleet Managers Don’t Use Vehicle Selectors

Cox Enterprises in Atlanta, GA, chooses not to use a vehicle selector. “Our drivers are given a dollar limit and allowed to choose their own vehicle. We do prefer four-door sedans,” says Patsy Brownson, fleet administrator for the company. Drivers are allowed to choose their own vehicles for morale reasons.

“We feel that they take better care of their vehicles and are more productive,” says Brownson. About 37 percent of the out-of-service vehicles are sold to the drivers.

Astro Office Products in Gardena, CA, has a fleet of 350 vehicles, and also chooses not to use a selector. “We have one vehicle and it’s distributed to the drivers,” says Stan Sugihara, fleet manager for Astro. There are 300 white Plymouth Acclaims, which are drive by the service technicians. “The technicians can also choose to drive their own vehicles,” say Sugihara. The other 50 vehicles are white Dodge Caravans that are used as pool cars. The sales staff uses their own vehicles unless they have demo equipment that is too large, in which case, they would be issued a Caravan.

Driver-paid options are not permitted. “The vehicles are easy to move in and out if they’re all the same,” says Sugihara. Standard equipment on the vehicles include a 2.5L four cylinder engine, automatic transmission, air conditioning, driver-side airbags, power/tilt steering, power brakes, AM/FM stereo, tinted glass, and cruise control.