March 2010, Fleet Financials - Feature
10 Myths About Fleet Management
Some are serious, some are fun, but there are a number of myths about fleet management (and fleet managers) that can skew both management’s, as well as drivers’, view of the job and the person.
Some come out in e-mails, some in conversation, some at meetings; whatever the source, there are myths about fleet management and fleet managers that make the professionals who do the job laugh - or cry.
1. Fleet management is a part-time job, at best.
Not sure where this myth came from, but the notion that fleet management is not a difficult, challenging, full-time job is laughable (and not in a funny sense). For one, fleet managers' deal with more employees, in more situations, often after-hours and on weekends, than just about any other corporate function (save, perhaps, benefits). Much of the day involves dealing with crises and putting out fires ("My registration expired! I ordered my new car; where is it? Can you help me sell my wife's car? But I had it towed to the dealer down the block!").
Fleet managers, when time permits, do actually make management decisions, such as which vehicles to use, how they should be equipped, what to do about a driver who just reported his or her third accident in a year, fixed and variable cost tracking, replacement criteria analysis, and much, much more. Part-time job? Not if it's done right.
2. Vehicles should be amortized on a 50-month schedule or 2 percent per month.
It's a nice round number, 2 percent per month, and is used more than any other amortization schedule, not only in practice, but in articles, commentary, and proposals. It can indeed be a useful rate for a "typical" fleet car, driving "typical" fleet mileage, and replaced under a "typical" replacement policy. But the spirit of the open-end TRAC lease is that vehicles should be amortized at a rate that will reduce the capitalized cost to reflect the market value at the anticipated point of replacement. That value/date point, in any fleet of any size, happens at widely diverse points; there is no "typical" fleet vehicle.
Vehicles in an inner city don't accumulate nearly as many miles as those in rural areas and remain in service longer, requiring longer amortization rates. Throwing a 50-month schedule at all vehicles can result in wildly fluctuating cash flows, while carefully matching usage and amortization rates better reflect true vehicle costs.