WALTHAM, MA – Due to a strong residual market in 2011, Thermo Fisher Scientific Inc.'s Global Sr. Category Leader for Fleet & Indirect Services, Rick Odell, C.P.M., told Automotive Fleet that his group was able to short-cycle 350 leases in 2011, generating a 10- to 20-percent premium over the expected residual values.
“Not only did we get the additional gain on sale of the vehicles, but we generated a cash flow that we were able to utilize to offset the high cost of fuel last summer, when prices went up to more than $4 for a period of time,” Odell said. “It was very successful. Our sales and service employees were happy to be getting new cars, and our finance professionals were happy to receive that cash at the end of the year.”
Odell said he faced a couple of challenges during this process. The first challenge was handling the additional volume of vehicles slated for replacement and remarketing. The second challenge was caused by a short delay in vehicle orders, but all parties involved were able resolve both issues.
“Our leasing company was, of course, able to accommodate us on the additional volume,” Odell said. “We also did something a little unique. We were selling cars at the end of the year in December . But rather than wait for the proceeds from auctioning those vehicles to hit our books in January, we requested a check for the vehicles sold in December. We were able to recognize a half-million dollars in cash at the end of the year rather than carry it over into 2012.”
For 2012, Odell said he doesn’t believe using this strategy again would produce similar gains.
“We took a look at short cycling again,” Odell said. “There were some vehicles that would qualify, but we didn’t think it would be that advantageous this year simply because there aren’t as many vehicles. I think the benefits this year would be minimal, and we’ll keep the normal replacement cycle for now.”
By Greg Basich
Originally posted on Automotive Fleet