When fleet managers think of remarketing their out-of-service vehicles, the first thing that comes to mind may be dollar signs–how much can they make? What may be overlooked are costs to resell a vehicle. Understanding these costs will allow you to better control them, maximizing your net resale return.
In 1992, Automotive Fleet contacted remarketing experts at several fleet management companies to quantify these remarketing costs. This year, a similar method was followed to see how these costs have changed. In most areas, costs have remained about the same. In a few areas, such as reconditioning, costs have risen slightly. Here is a breakdown of what it costs to remarket a fleet vehicle as of August 1999:
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.
"We don’t do business with vendors who charge for storage," said Todd Norenberg, remarketing manager for GE Capital Fleet Services in Eden Prairie, MN. "On rare occasions, we’ll allow it when we’re in a difficult situation, but generally speaking, we’ll only do business with vendors who will not charge us for storage. That’s negotiated in the agreement with them."
"We don’t store vehicles at our representatives," said Jennifer Schade, supervisor of used-vehicle marketing services for ARI in Mount Laurel, NJ. "Sometimes there are fees for vehicles that have been sitting somewhere, such as impounded vehicles, and we have to pay storage to get the vehicle picked up, but our representatives don’t have any storage fees."
Administrative Costs Related to Vehicle Turn-In: These are turn-in-related expenses that are not covered by the lessee’s monthly management 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 remarketing 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. Reconditioning costs average around $200.
Sales Fees: This fee is encountered by all remarketers, and is typically incurred when using auctions 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 locations instead of being re-run through the original auction sales site, incurring transportation charges ranging from $300-$350.
