Vehicle Acquisition and Disposal

Sound decisions come from good intelligence and weighing a number of requisite factors


Additional considerations for used vehicles should include reduced purchase price equal to depreciation, potential additional costs for necessary mechanical repairs or cosmetic improvements, limited warranty coverage and reduced resale or trade-in value when the vehicle is replaced.

RESEARCH APPROACHES

There are a number of methods for researching possible vehicle choices, according to CAFM. Among them:

• Personal expertise - "Trust your own knowledge and experience but be open to new products and technology. Work to increase your own knowledge."

• Equipment history - Comprehensive factual operating and maintenance history on existing equipment is an invaluable resource, pinpointing problem areas and supplying benchmarks from which to evaluate other equipment.

• Trade journals - Journals and other periodicals often feature evaluations of equipment. Ads and new product sections offers sources of manufacturer literature. Create a resource file of articles and product literature.

• Vehicle dealers and manufacturers - The dealer or manufacturer knows his product best. Develop strong professional working relationships with primary vendors. They are the best sources of product literature, demos, fact books and general knowledge.

• Demos - "There is no substitute for eyeballing the iron." Try whenever possible to evaluate demos in a working environment, preferably with a used machine. Involve the user and operators if possible.

• Other users/trade associations - Seek the opinion - and recognize it as opinion - from other equipment users and fleet managers. Try to seek out individuals with similar operations. User associations often are superb places to share information.

ACQUISITION COSTS

Determining vehicle lifecycle costs is one of the most important, and most complex, steps of the vehicle selection process, observes CAFM. The procedure varies, depending on whether a fleet is owned, uses open-end finance leases or uses closed-end leases.

If vehicles are being acquired through open-end finance leases, the process focuses on four major steps: calculate capitalized cost to determine ownership or lease costs; project resale values; determine operating costs; and then total these costs for each vehicle being considered. Here is CAFM's overview:

• Capitalized cost - Obtain the dealer invoice prices - if available - and consider and deduct all available pricing options. If analyzing costs before final information is available from manufacturers, estimate dealer invoice based upon the previous year's model. Factory sales representatives, dealership or leasing company salespeople can provide their estimates.

Pricing options and special fleet considerations can include: monetary incentives, special programs, guaranteed market value plans (assure that a vehicle's depreciation will be at least as good as a competitive vehicle's depreciation, based on a published source), price protection (guarantee against increase in vehicle cost is usually available only before introduction of new model year, with order and delivery before specified deadlines) and rebate programs (offer credit after delivery). Next, add or deduct any dealer or leasing company charges or discounts.

• Lease costs - Determine the number of months that the vehicle will be in service, then estimate the resale value of this vehicle at the time it will be removed from service. This can be done by checking the current return on similar vehicles at auction or using used vehicle valuation guides. Next, subtract the resale value from the capitalized cost to determine actual depreciation.

• Operating costs - Estimate fuel and maintenance costs by figuring miles per gallon, miles to be traveled, maintenance costs, any special arrangements for maintenance which were offered by or negotiated with manufacturers, and any repairs which are covered by extended service plans.

The lifecycle cost can be determined by adding the total lease cost and the total operating cost to determine the total fixed and operating costs. The number calculated for one vehicle type can be compared to the number calculated for each other vehicle type being considered.

CLOSED-END LEASES

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