Royal Cup Inc. in Birmingham, AL is in the business of selling coffee. Royal Cup is not in the business of selling vehicles. But the company has developed a network of buyers for its trucks, and the company’s Manager of Support Services Ben Robinson says that helps Royal Cup maximize its resale value, even if the vehicles are sold at a wholesale price. "If we want to get something closer to retail, then we’re in the wrong business," Robinson said. But Robinson and other fleet managers interviewed by Automotive Fleet say that developing a market of buyers is the way to get the best resale value. One fleet takes advantage of the National Association of Fleet Resale Dealers’ network of buyers. Another uses the network of vendors from a remarketing company, and another has developed a network of repeat customers from the public. Robinson at Royal Cup recommends that fleets develop their own market of repeat vehicle buyers.
Wholesalers Know Royal Cup’s Routine
Royal Cup has a fleet of about 350 vehicles, 160 of which are medium-duty Isuzu NPRs and FRRs, and GMC W4s and W5s. The company’s fleet is spread over 72 cities. When one of the cars goes out of service after 65,000 miles or three years, Royal Cup’s leasing company disposes of it at auction. With the company’s medium-duty trucks, however, the company has developed a list of wholesale truck dealers who are so comfortable with Royal Cup that the atmosphere of familiarity makes selling the used trucks that much easier. "And that’s because the wholesalers here know us, they know our vehicles, and they know what maintenance we do on them," Robinson said. The wholesale dealers know that Royal Cup replaces its smaller trucks, the Isuzu NPRs and GMC W4s, at 130,000 to 150,000 miles. Its larger trucks, the Isuzu FRRs and GMC W5s, are replaced at 150,000 to 170,000, which is low mileage for the fleet of all-diesel trucks, Robinson said. It makes the wholesalers happy because they are getting a good used product with low mileage, Robinson said. "Where we’re trying to go with this is to hopefully not have a major component failure before we bring the truck out of service," Robinson said. "What happens is we end up getting a higher resale value for it. And the wholesalers get a good marketable product to put on their lots. "I think holding on to vehicles longer ends up costing you more, although in the short term it appears not to," Robinson said. "Over time, it costs you more to hold them in service longer because of increased maintenance and lower resale values." When a Royal Cup truck goes out of service, Robinson notifies wholesalers who regularly buy vehicles from Royal Cup. The wholesalers will take turns driving the vehicle, and will competitively bid on it. Robinson can give several examples of how he got good resale value on these sales. "Yesterday I sold a 1992 Isuzu NRR," Robinson said. "It had 207,000 miles on it, which is beyond our normal replacement, and it had a major component replacement about a month and a half before we sold it. We ended up selling it for $4,580." Another recent sale included a 1995 NPR with 158,716 miles on it that sold for $8,880. The original purchase price on the vehicle was $30,555.
Media One Uses Marketing Company’s Network
When Joe Mueller started working for Media One in Jacksonville, FL, 13 years ago (when it was known as Continental Cablevision), the company did not have much of a program in place to get good resale on vehicles. Now, Media One uses a remarketing company called Motor Vehicle Marketing, located in Jacksonville, that sells the vehicles for Media One. "We call them, they pick the vehicle up, pick the titles up, and then it’s up to them to sell," said Mueller, fleet supervisor for Media One. "It takes from three to eight weeks, and they mostly sell through a network of vendors they have." Mueller says the effort has paid off in regard to resale. And that is for Media One trucks and vans that have long service use. The company buys vehicles new and keeps them as long as possible, up to 150,000 miles and up. The average resale price Media One receives for a typical full-size conventional cab under-9,000 GVW is just under $2,500. An under-9,000 GVW van will bring an average of $1,500. A full-size conventional cab 9,000-17,000 GVW will bring Media One an average of $5,600. "When I first got here, we were giving them away for $200-$300 just to get them off the parking lot," said Mueller, who oversees a fleet of about 350 vehicles, mostly vans and light-duty pickups with utility bodies. "When I started, the care of the vehicles was so bad that by the time we got rid of them, they weren’t worth anything," Mueller said. "But we’ve done a lot to improve the maintenance and we’ve got a better reputation." A good preventive maintenance program has helped Media One keep its vehicles in service for a long time and still get high resale value. Joe Mueller at Media One says don’t make alterations to vehicles that the general public wouldn’t want. That could lower resale value, he says. "Vehicles are made better these days, and with the exception of transmissions, the trucks hold up pretty well," Mueller said. The company performs preventive maintenance every 4,000 miles and performs tune-ups about every 40,000. "But we’re going to look at that again because most vehicles we’re buying now are coming with 100,000-mile parts on them," Mueller said. Mueller advises other fleets to do three things to maximize resale value:
Have a good preventive maintenance program.
Keep the vehicles in good condition and don’t make alterations to the vehicle that the average person wouldn’t want, "like holes in the dash to mount equipment," he says.
Put a little effort into re-selling them. "Don’t just sit down at the auction house and hope to get any money out of them," he said.
Hardee’s Uses NAFRD Network of Buyers
Ike Campbell works hard to get good resale value from his vehicles. Why? "Depreciation is my biggest expense," said Campbell, who is corporate fleet manager for Hardee’s Food System. "If I can maximize resale, that’s what I feel I’m being paid for. You can’t control the price of gasoline or tires, but you can control how your vehicles are marketed." One of the main ways he does this is by using the network of the National Association of Fleet Resale Dealers. Being familiar with members of NAFRD has helped Campbell get high resale value. Campbell, who oversees a fleet of about 620 vehicles of mostly cars and about 120 trucks and vans, said using the NAFRD network has been extremely helpful. "If I know a NAFRD member who really wants a van, he will call a car hauler to take it to their location and then we settle on the price," Campbell said. "They get the vehicle before they even agree to purchase it. If we can’t agree on the price, the NAFRD member will turn it over to the leasing company at no cost to me. But that’s never happened." Campbell says that NAFRD members make profit by purchasing large amounts of vehicles. And like Mueller at Media One and Robinson at Royal Cup, the relationships developed with the buyers are important. "I sold a Ford Expedition about 30 days ago with high miles on it," Campbell said. "It needed tire and brake work. But they put tires and brakes on it and gave me what I thought was more than fair market value. I tend to get a little more for the vehicles because if you really look at it, NAFRD members really make their spread on numbers. "It’s like the supermarket. They get turnover," he said. "If they know they can turn over more vehicles, and they know you are a steady source they can rely on as to the condition of the vehicle and you’re up front with them, they will tend to give you an extra dollar for that vehicle because if they can increase their numbers, they can afford to take a little less profit in order to have a constant source of vehicles." Campbell says his fleet has been growing, however, and he may not have as much time in the future to spend on remarketing issues. Asked to give advice to other fleets on maximizing resale value, Campbell said that to be prepared for emergency situations, "I’d recommend setting up networks of people to sell to. It’s been advantageous having a network as a backup."
Grinnell Mutual Relies on Repeat Business
Grinnell Mutual Reinsurance Co. in Grinnell, IA has a company newspaper that goes out to 550 employees.
Auctions, Wholesalers Help Municipal Fleet Maximize Resale
For the city of Boca Raton, FL, sending its out-of-service vehicles to a wholesaler to be auctioned is very cost-effective. "The cost to the city is a flat fee of $65 for administrative work," said the city’s Fleet Superintendent Gary Giragosian, who oversees a fleet of about 600 vehicles for the city. "We’ve been doing well with returns. The vehicles don’t have to be running and they don’t have to be tested for emissions. And we can send them up there any time, so we don’t have vehicles sitting for months waiting for an auction. We don’t have to pay overtime to prep vehicles for auction." That’s all the advertising the company needs to get an average of 110-120 percent of the Automotive Market Report (AMR) price. "We have a lot of repeat buyers, friends of employees, and friends of people who bought cars here previously. They usually find us; we don’t have to find them," said Grinnell Fleet Administrator Brian Thompson, who oversees an 80-vehicle fleet of mostly Chevrolet Luminas, Buick Centurys, Pontiac Grand Prixs and Dodge Caravans, and sells 25-30 vehicles per year. "It’s a good deal for us and a good deal for someone looking for a good, clean used mid-sized car," said Thompson, who keeps vehicles in service for about 30 months and 60,000 miles. An example of the return Grinnell gets on its vehicles took place this past April, when the company sold a 1997 Dodge Intrepid for $9,400. "We usually set it at a wholesale price, which is a reasonable price," Thompson said. Thompson’s remarketing program is not complicated. When he is ready to sell a vehicle, he has it cleaned and has any major damage repaired. "But we seldom have to do a great deal," he said. "We usually wash the outside, vacuum the inside, and it’s ready to go." Ben Robinson at Royal Cup attributes his company’s resale success to putting low-mileage, well-maintained vehicles in the marketplace. Then, the car is listed in the company paper. Thompson has a list of buyers from Iowa, Minnesota, North Dakota, and Illinois. Grinnell sells insurance in nine Midwestern states. Thompson said he would advise other fleet managers to offer clean, reliable cars to get the best resale value. "Our repeat customers have had good luck with our vehicles throughout the years. They know we take good care of them, we service them regularly, and they’re not abused, even though the mileage might be a little higher than you would normally find on a two-year-old vehicle."
Fleets See Fall as Ideal Replacement Time
Fleet managers interviewed for this article say they get the best resale value when they sell vehicles in the fall. "We mostly sell in the September/October timeframe. That’s when we get the best price," Thompson said.
Fleets Offer Discounts To Employees
ABM Industries Inc. sells a majority of its out-of-service vehicles to its employees. ABM charges fair market value, which is determined by ABM’s leasing company, less 10 percent. Those that aren’t sold to the employees are remarketed by the leasing company. One recent example was the sale of a 1997 Buick LeSabre Custom that had a PC Carbook value of $11,297. ABM sold it to an employee in Texas for $8,415. "It’s a good incentive to have them take good care of their vehicles," said Ellie Walsh, ABM’s assistant vice president and director of administrative services. "We know we could probably make a lot more money on the open market, but this is a nice benefit to the employees." North Pacific/Oregon Auto Insurance in Portland offers vehicles to its employees for the Kelley Blue Book wholesale price, minus $200, said Fleet Administrator Jan Rubach. Campbell said he tries to replace the cars in his fleet in the October/November timeframe, and said the second-best time is after February. With his trucks, however, "there tends to be a market year-round," he said. Robinson said, "We try for fall and spring, but we’re more driven by mileage."
Software Helps Fleet Determine Replacement Cycles
When the vehicles for Media One in Jacksonville, FL, reach about 100,000 miles or five years in service, Fleet Supervisor Joe Mueller starts looking more closely at the operating costs of each vehicle to figure how much longer they should be kept in service. Most of that is tracked on Gaelic Fleet software by Gaelic Fleet Services in Beaverton, OR. Mueller said the spreadsheet program contains two graphs that track lifetime operating cost per mile and capital cost per mile and tracks it against the average for that class of vehicle. Then another graph combines the two and gives a total lifetime cost per mile and it’s plotted out on a year-to-year basis. "So it’s pretty obvious when we see an increase in operating cost, we pretty much know we’ve gotten everything out of the vehicle we can, and it’s time to get rid of it," Mueller said. "We look at other operating concerns: Did we have an expensive, once-in-a-lifetime repair that caused the cost to go up? Is there a reduction in the use of the vehicle? Is it in such bad shape that they are never taking it into the field and that’s why costs are going up? We also look at the number of work orders we’re writing on the vehicle."
