The other day a fleet administrator told me that he had changed his buying policy. He said that he was no longer buying from fleet dealers at the "customary" cost plus $50, or cost plus $75. "We are not anxious to do business with dealers who are anxious to give their merchandise away," he told me.

I believe that this philosophy, this purchasing policy, is a subject that eventually must affect every fleet buyer and fleet dealer in the country.

The leasing of passenger cars began to boom immediately after World War II. There can be little argument that prices have risen more than 100% since 1945. Yet, despite the increase in wages, despite the increase in the cost of producing goods, despite the increase in the cost of getting goods to market, and despite the increase in the cost of selling these goods, the cost that licet dealers have charged for their merchandise has remained relatively stable. In the early years perhaps this was necessary to attract business. In the last decade, however, perhaps this reason, more than most, has been the cause of small fleet dealers dropping out of the ear fleet market.

It is an industry axiom that for a fleet dealer to be successful, he must deal in volume. This volume allows a dealer to sell his merchandise at a lower price (say cost plus $50) than the dealer who is selling fewer units. But today, that picture is changing. Even the volume dealer is feeling a profit pinch. The cost of doing business keeps going up even for the volume dealer. Yet, his price on his merchandise remains relatively stable. Where does this leave the small dealer? In the last few years it has generally left him out of the car fleet business.

"Having to deal at cost plus $50 has put more fleet dealers out of business than any reason I know," one of the country's leading fleet dealers told AF.

"Without volume, I don't see how fleet dealers can operate at $50 over," said the president of one of the country's major leasing companies.

If the fleet dealers want more money, why can't they simply charge more? The answer lies in competition. Even if the major fleet dealers (any dealer who sells more than 1,500 cars during a model year) agreed on a set price for their merchandise, in all probability they would be undersold within 24 hours after the policy was put into effect. Such policies have been attempted in the retail end of the automotive business. They usually have met with disastrous results because of this same underselling.

Not all fleet dealers are in agreement, however, with the premise that a dealer can not operate profitably on $50 over tissue.

"Operating at $50 over tissue separates the amateurs from the professionals," was the opinion of one major fleet dealer. "A dealer who knows what he is doing can operate under these conditions and do quite well," the dealer told AF.

Yet, this same dealer was quick to admit that in order to operate under a $50 over policy, he had to have volume. This same dealer also admitted that a small dealer who dealt at $50 over was pulling an additional strain on his operation.

What does all this have to do with the fleet buyer? Quite simply, this price structure affects the fleet buyer in many ways. The most obvious, of course, is price. But perhaps the biggest influence that price exerts on the fleet buyer comes in the area of service.

There are few fleet buyers who at one time or another have not complained about service. Most of these complaints come in two areas: dealer get-ready and maintenance.

With the cost of doing business obviously increasing, it appeals to me that the fleet buyer is going to have to decide a very basic question: What is he willing to pay for service?

Will the fleet buyer be content with the service he is receiving? Can the fleet dealer provide satisfactory service without raising prices? Can the fleet dealer increase his profits by providing more service and thus increase his volume? Can the fleet dealer increase his volume and still hope to maintain a high level of service efficiency without drastically increasing prices?

From this editor's standpoint, the question of cost is one that every fleet dealer and every fleet buyer will have to face sooner or later. For it appears that the solution to the service problem regarding fleet dealer and fleet buyer may lie completely within the area of price.