How can fleet managers benefit from “best value” awards?
There’s so much to consider when sizing up a fleet vehicle—and it seems everyone has an opinion. Fortunately, there are also studies on the market that use hard data to evaluate vehicles of every stripe, and provide concrete information based on meticulous research.
One of these is Vincentric, who measure the cost to own and operate vehicles based on various scenarios. The Vincentric “Best Fleet Value in Canada Awards” measure eight cost factors attributed to the total cost of ownership in a typical fleet—depreciation, fuel, insurance, financing, repairs, fees and taxes, opportunity costs, and maintenance.
“We estimate how much each of those eight cost elements will amount to,” says David Wurster, President, Vincentric. “So you add up depreciation plus maintenance, insurance, fees and taxes, and so on to get the total cost of ownership.”
Doing the math
Although each factor is treated the same, they don’t all have equal importance. For example, depreciation is more important, followed by fuel, maintenance, insurance, fees and taxes. “Depreciation is the largest. It’s about 37 percent, then fuel cost at 28 percent,” Wurster adds.
There are 28 scenarios, with combinations of driving distances, in urban, rural or suburban settings. “The reason we have 28 scenarios is to get a wide range of driving patterns,” he explains. “In the real world, a fleet operator would really need to look at their specific driving patterns—are they a high mileage or low mileage vehicle?”
The Vincentric study looks at 39 vehicle segments, from subcompact to full-size one-ton cargo vans. “They’re all competing against other similar type vehicles,” Wurster notes. “It’s not an analysis of how well the car drives or any performance attributes, but just a financial analysis of the vehicle. It’s a lowest cost of ownership analysis for the fleet market, and that’s how you see some vehicles that you might not expect to see on there.”
Wurster says he’s always surprised when he sees a Smart on the list. “They’ve got the electric vehicle, which is interesting,” he adds. “We see a lot of repeat winners from last year, like Chevrolet and Ford. They’ve traditionally done well, just in the total number of vehicles they’ve got.”
He points out that the Mazda3 has won seven years in a row. “The Sprinter 2500 wins all the time, as does the F-150 and the F-250,” he says. “The Toyota Prius C has won five times.”
When fuel prices go up, more fuel efficient vehicles become more popular, and vice versa when fuel prices drop. “Fuel has been moderate for the last couple of years, so that’s stabilized,” Wurster explains. “But when fuel prices go up, that starts to hurt the depreciation or residual values on the bigger vehicles.”
Manufacturers are concentrating more on trucks. “For example, if Ford removes sedans, at least from North America, that’s going to affect us,” he says. “That will affect how this works.” He also wonders how electrification will impact fleets. “What’s going to happen with the whole concept of ownership? Are most corporate sales customers still going to own their vehicles, or will they go to some other model?”
Real world conditions
According to David Thornton, VP Sales and Client Sservices at Foss National Leasing, if buyers remember a vehicle had won awards—they may not remember the award—but if they remember seeing a lot of accolades for it, that might help the vehicle get a higher return. “But fleet managers also want to know how that vehicle will historically truly operate,” he adds.
For example, a maintenance guide may be based on certain conditions, such as doing the speed limit, no head or tail winds, no extra weight in the vehicle, and assuming a 150 lb. driver. “The vehicle rarely ends up operating like it should because of real world conditions,” Thornton says. “An F-150, in most fleet situations, does not have a 150 lb. driver.”
It’s important to consider all criteria. “For example, if a customer is very safety focused, fleet managers might recommend a vehicle that may cost one cent more per kilometre than another vehicle,” Thornton adds. “The vehicle they’re promoting is a five-star crash rated vehicle, which could help justify spending the extra money. So it depends on the fleet’s priorities.”
Studies often show trends, such as the shift towards trucks. Customers may have to evaluate the value of their car fleet, for example, because the resale value is going to be higher down the road for an SUV, since no one is going to want a car.
Several data sources
Studies provide one of several data sources. Larger fleets tend to rely on historical data, to get a feel for what’s actually happened. “One study might say this is a best value vehicle, but is it five star crash rated?” asks Thornton. “Is it a high residual value vehicle? If it’s a sedan, what’s that going to do for my value four years from now?”
Fleet managers can use studies to help analyze the numbers. “You have a vehicle that costs one cent per kilometre more than another but it’s got all these awards,” says Thornton. “So it might be worth spending a little bit of extra money, because if you had to sell this vehicle, it’s got the backing of reputation and awards.”
He also offers the example of a driver who requests their employer invest in a specific vehicle because it has won a certain award. “The fleet manager’s answer should be, ‘We’ll take a look, but there are many other factors that we need to consider.’”