Ed Bobit, 1998

Ed Bobit, 1998

At last month's NAFA Fleet Institute in Seattle one had to go back home with a good feeling. All to NAFA's credit, it was probably the best educational program in years, with competent, speakers and moderators which all led to a great attendance and participation.

You missed an unusual opportunity to learn if you were not there. Seattle is a beautiful city, especially with the sunshine we were blessed with.

I might also add that many felt the AFLA Conference was also the best in years with record attendees.

With our deep involvement for several of our magazine titles in the fleet market, we sent a bevy of our editors to get the pulse of the industry. (Besides all the cocktail receptions informally known as "hospitality suites" that never seem to close).

This year we asked our editors to talk to fleet managers and ask our "Man-in-the-Aisle" question: "What is the major issue facing you at this time?"

Our dedicated guys came back with nearly 100 responses. While some voiced more than one, the single dominant issue was "cost containment."

Not surprising, you say? Fleet managers have been pursuing cost savings forever. You're right. What is surprising to me is that in this era of virtual deflation for running costs (cheap gas) and the competition between outsourcing service companies as well as the street and sole-source incentives from the makers, where is one to look.

I'd like to give you a clue.

If you give a few critical moments to my three simple charts you will note that over the past couple of years recovered residuals have decreased from 46 percent to 40 percent while initial costs have inched up somewhat. Think about it.

You are paying more for the new ones and getting back less. Your actual costs for depreciation have, increased nearly $2,000 per car.

How's that for a kick in the pants?

Instead of going into that budget meeting announcing your cost containment prowess as a vigilant watchdog or wave some rebate check, you face the consternation of executives who squirm at the fact that they've got to come up with nearly $l,700/car more than they did just two years ago at the turn.

Paraphrasing the infamous former Sen. Everett Dirkson (R-IL), "You lose a million here, and a million there, hell, pretty soon it starts to add up."

I sincerely hope, for your sake, that you have been avidly reading our many features on remarketing and my many editorials on depreciation costs being the one most important area for true fleet management; i.e. "The rest is detail."

I hope that you know all the auction lane buzzwords; I hope you how to read Black Book, Kelley, AMR and the rest of the guidebooks. I hope that you are an expert in analyzing your outsource service company on channels and comparative residuals in their remarketing assignment. I hope that you make a conscious effort to direct your drivers to turn in a clean car.

Just know this: with the strong retail incentives and the very special leasing rates available to consumers, you have probably seen the last of unusually high residuals for a while. And it will undoubtedly get. worse with maker overcapacity and share of market goals.

It's no wonder so many are running their cars longer. I also hope you're on very good terms with your boss.

Originally posted on Automotive Fleet

About the author
Ed Bobit

Ed Bobit

Former Editor & Publisher

With more than 50 years in the fleet industry, Ed Bobit, former Automotive Fleet editor and publisher, reflected on issues affecting today’s fleets in his blog. He drew insight from his own experiences in the field and offered a perspective similar to that of a sports coach guiding his players.

View Bio
0 Comments