Customer in the education industry with 700 vehicles, 60% of their fleet was made up of Dodge Caravans and Ford Escapes used to carry samples and products.
The company was purchased in the fall of 2013 by a company who took over and immediately wanted to cut costs everywhere, including fleet. They wanted to take their vehicles on fleet management and move them to reimbursement. They viewed this as a major cost savings. They would reimburse their drivers $310/month, plus $0.17/mile for fuel.
The client’s fleet team decided to utilize our Strategic Consulting group to run a reimbursement analysis showing the quantitative and qualitative comparisons of fleet versus reimbursement. The client understood the impact of the qualitative items, but new ownership was most concerned with cutting costs and was convinced going to reimbursement was the best way to do so with fleet.
The fleet team understood the new ownership was open to new ideas. ARI performed site visits, had discussions with drivers, and performed ride alongs to understand how the vehicles were being used. Based on our assessment of the fleet, ARI determined the client no longer needed the cargo space they once needed. We proposed they replace all vehicles with Ford Fusions. Doing this would enable the client to negotiate a better volume discount from the OEM, incur lower annual maintenance costs, improve fuel economy, and realize gains on their current vehicle sale proceeds due to the resale market still being strong. We also suggested a monthly driver contribution deduction.
More efficiently run by a fleet management company.
Demonstrated best cost savings approach was not reimbursement.
$2,141,790 in total life cycle savings.
Projected Savings/ Benefits and Results to Date
The analysis and recommendations showed $2,141,790 in total life cycle savings ($535,447 annual savings) for a company provided Ford Fusion vs reimbursing their drivers $310/month, plus $0.17/mile for fuel. The client understood their fleet would be more efficiently run by a fleet management company than with reimbursement and they were extremely happy with the service ARI has provided over the years.
With the help and involvement of the client, we took a deep dive and explored multiple options to determine the best cost savings source for them:
- Closed end leasing
- Lease (with current models) vs reimbursement
- Lease (with new vehicle model) vs reimbursement
- A mix of closed end and open end leasing
Our customer’s fleet team was able to demonstrate to ownership the best cost savings approach was not reimbursement, but would be to replace their current fleet with new models and stick with open end leasing.