Commercial fleet managers tend to agree on these points: When acquiring a fleet vehicle, make sure it's appropriate for the job. The price must be right. And when the vehicle is ready to be taken out of fleet service, it must bring the highest return possible.

That consensus could be seen in the 1999 New Vehicle Acquisition Survey compiled by the National Association of Fleet Administrators (NAFA), which included responses from 354 fleets.

For the second year in a row, "Job Suitability," "Initial Cost," and "Depreciation/Resale Value" are virtually tied at the top of a list of 16 factors considered by commercial fleet managers in making their vehicle acquisition decisions. NAFA scored its questions on a one to five scale (five being most important). On the commercial side, "Job Suitability" rated tops at 4.4, with "Depreciation/Resale Value" closely following at 4.3 – which is about as close as a photo finish in a horse race.

And public service fleets nearly mirrored the commercial sector's attitudes, ranking "Job Suitability" and "Initial Cost" both at 4.5. However, the public side rated "Depreciation/Resale Value" lower at 3.2. More important to government fleets were considerations such as "Repair Record" and "Serviceability/Ease of Repairs" (both 4.0), closely followed by "Safety" and "Warranty Program" (both 3.9). Why the difference in emphasis?

Mainly, it's because public service fleets tend to keep their vehicles in service longer, which accounts for their emphasis on repair and warranty.

To that point, Dennis Turner, fleet manager for the city of Modesto, CA, (where fleet size parallels city growth at 2-3 percent a year) said, "We run our pool sedans 10-12 years and about 180-190,000 miles, and our police patrol cars are run 30 months or 100,000 miles."

At those numbers, such public service vehicles – even though well maintained – don't draw high bids at resale. But the city has more than gotten its money's worth in use.

The commercial sector is a different matter. Among the commercial fleet managers Automotive Fleet interviewed – fleets ranging from 50 to 10,000 units – only three fleet managers equally rated "Job Suitability," "Initial Cost," and "Resale Value."

One dissenter was Allyson Ward, fleet manager for the Allemite Corp. in Charlotte, NC, which manufactures lubricating equipment. She supervises a mixed-brand fleet of 49 cars and one passenger van. Ward said she is willing to change such things as selectors, options, and safety equipment if those items contribute to improving job suitability as well as getting a better price.

Ward added, "They go hand in hand: All are equally important."

For example, Ward is gradually moving to a near all-Pontiac Grand Prix fleet. Why? Because the sedan comes standard with the beefy, sport suspension that can handle about 500-700 lbs. of sales equipment in the trunk.

Judy Price agrees with Ward's assessment. Price is fleet manager for National Semiconductor Corp., Santa Clara, CA. Her 300-unit fleet consists entirely of SUVs (Ford Explorer XLTs and Jeep Cherokees), except for 15, company-owned, heavy-duty trucks. So why does Price concur with NAFA's three-way tie on top considerations? Simple: She orders the vehicles loaded and has a 65 percent employee buyback program.

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"I've always chosen vehicles that we feel good about in terms of resale. And right now, SUVs are strong in the resale market," Price said.

Source: National Association of Fleet Administrators

Commercial and public sector fleet managers are in sync with the importance of "Job Suitability" and "Initial Cost." as the top factors in determining vehicle acquisition. Where they differ is in the importance of resale (given greater importance by commercial fleets) and repairs/warranty (highly considered by public service fleets, because many have in-house maintenance facilities and accrue high mileage on vehicles).

Most Driver Policies Evolve

If there is anything that is not cast in concrete, it's the traditional driver policies. Bob Brown, Xerox's manager of vehicle fleet business and operations, Rochester, NY, said his policies have run the gamut from having hard and fast rules to a tone of great flexibility, and then back to a mid-point where some policies are mandatory and others are flexible.

Brown, like most fleet managers interviewed, is concerned about three vehicle policy areas: ABS, airbags, and cellular phone usage.

Average Increase in Fleet Cap Costs, '98 MY to '99 MY

For the NAFA survey, capitalized cost was defined as the actual cost of the unit, plus dealer markup and delivery costs. In this chart, despite the perception of manufacturer pricing restraint, cap costs, in general, have been rising. Another observation is the increased fleet interest in buying light duty trucks and cargo vans from 1998-model year to 199-model year vehicles.

1999-Model Year Cap Costs Increase 2.7% to 5.9%

Another way to look at cap cost changes is in average, median, and mode changes. For this chart, NAFA computed the average by adding all responses and dividing by the number of responses. Median was the number exactly in the middle with half of the responses above and half below that mark. Mode is the most frequently given response.

Cell Phone Use Emerges as Issue

As to cell phone usage while driving (which the National Highway Traffic Safety Administration says is a contributing factor to many accidents), Brown has discouraged it:

"As part of our Safe Driving Tips program, we tell them to pull over to the curb or get a hands-free setup."

At Quaker Oats Co. in Chicago, Linda Tegtmeyer, manager of administrative services/fleet, said ABS and airbags are only purchased when part of a standard vehicle package.

"In terms of cell phone usage, we ask them to pull over to the curb when they use them," Tegtmeyer said.

At Allergan in Irvine, CA, a specialty therapeutics company, Fleet Coordinator Melissa Beyer manages a 320-unit fleet (300 sedans and 20 minivans), and insists on airbags and ABS as safety features. As to cell phones, their use has been incorporated in company accident reports.

Beyer said, "We don't have a cell phone policy now, but will probably be amending that this year so drivers don't use them while the vehicle is in operation."

Similarly, the City of Modesto, CA city manager has issued an administrative directive against using the phones while the vehicle is in motion. National Semiconductor asks its drivers to use common sense and pull over.

Beverly Reichle, manager, fleet services administration for The Gillette Co. in Boston, said policy on cell phone use is left to managers of the company's six business units.

"But I think this might be an area we'd consider in our next review of our driver policy manual," Reichle said. (Currently, Gillette's legal department is considering whether to allow installation of airbag deactivation switches.)

Percent of '99 MY Vehicles Ordered From Each Manufacturer

Chrysler 24%; Ford 41%; General Motors 28%; All other Manufacturers 7%

Cap Costs Up, Mostly for Vans

One of the findings of the NAFA survey was that cap costs for cargo vans was up 13.1 percent and the cap cost for light-duty trucks rose 5.9 percent.

Other issues, such as truck acquisitions (one in five vehicles acquired was a light-duty truck) fell right into line with fleet managers considering how to get the job done.

Most Drivers Not Given Choice of Vehicle

% of Respondents

Drivers do NOT have choice of make or model

62%

Drivers can choose make and model

19%

Drivers can choose model only

10%

Drivers can choose make only

9%

Drivers NOT given choice of colors, seats, options

40%

Drivers can choose exterior color

51%

Drivers can choose interior color

50%

Drivers can choose seating options

19%

Drivers can choose option packages

19%

Drivers can order extras NOT included in standard vehicle

40%

Drivers are charged for such orders

87%

One way to lower acquisition costs is by limiting driver choices- even on driver- paid options. That way, fleet managers know well in advance about the vehicle they will have to remarket in a future wholesale market. Not included on the chart was, 60 percent of respondents refuse to allow drivers to special order extra options.

One in Five Companies Will Increase Fleet Size

% of Respondents

No changes planned in fleet operations

60%

Increase fleet size

19%

Decrease fleet size

11%

Acquire more sport/utility vehicles

7%

Acquire larger vehicles

4%

Lease significant number of vehicles previously purchased

4%

Purchase a significant number of vehicles previously leased

2%

Acquire smaller vehicles

1%

Divest most of fleet to employee ownership

>1%

Other

1%

No question about it, according to NAFA's survey and Automotive Fleet interviews, fleets sizes are changing in about 40 percent of all cases. While 19 percent of fleets will increase in size, that is offset by 11 percent which are getting smaller. Composition is also changing, particularly with sport/utility vehicles (up 7 percent) which are hot sellers on the resale market.

Most Companies Don't Have an Executive Vehicle Policy