For generations and continuing today, most businesses with small fleets source vehicles and services through their local dealerships and handle fleet duties internally or by contracting with individual vendors. At some point, these fleet operators might consider the services of a fleet management company (FMC) — the assumption being that an FMC can satisfy fleets’ needs above and beyond a dealers’ suite of services.
Nick Lowry, fleet manager for Doan Chevrolet in Spencerport, N.Y., is working to change that mindset. “At the dealership level, (fleets) can get that turnkey solution now, and no one seems to know about it,” he says.
Along with other fleet-minded General Motors dealerships, Doan is leveraging GM’s relationships with national vendors to offer services similar to those from FMCs. Those services range from registration and title management, fuel and maintenance programs, to collision repair, subrogation, and telematics — all on the same bill.
In addition to traditional financing, fleet dealerships are also able to match FMCs with a range of leasing options, from open-end TRAC (terminal rental adjustment clause) leases to closed-end capital leases. These dealerships may also provide disposal services for fleets that don’t have the necessary time or expertise in remarketing.
As well, don’t disregard a fleet dealership’s ability to deliver on price, Lowry says.
The dealer-manufacturer relationship offers certain advantages, including setting the fleet up with a competitive assistance program (CAP) based on fleet size, “wiggle room” in retaining some holdback money for the client, and elimination of the courtesy drop fee, about $175 to $275 per unit.
According to Lowry, “A profitable deal for us could be a couple thousand dollars less (per vehicle, per lifecycle) than what an FMC can do.”
When Lowry interacted recently with a potential client that had been leasing through an FMC, the price equation became even more compelling. Lowry extrapolated that the FMC’s management fee, which was bundled into the total lease payment, came out to 5% to 7% of vehicle acquisition cost, or $40 to $55 each for a seven-vehicle fleet. On the other hand, Doan charges a flat fee of $6 per vehicle, per month.
“For seven vehicles, you’re talking six figures (in savings) over a three-year lifecycle,” he says.
Exploring Dealer Options
The Pike Companies Limited, located in Rochester, N.Y., is a fifth-generation construction manager and general contractor providing construction services in the eastern U.S. and had been leasing its fleet through an FMC for its Pike and Lecesse Construction Services companies. Last year, however, the company was approached by a GM corporate fleet representative on the Chevrolet Silverado. At that point, “We started exploring the fleet management options offered by the dealer,” says Donna Hoyt, who oversees the The Pike Companies fleet in her role as Support Services Unit Manager.
The Pike Companies started interviewing local dealers and landed with Doan. After getting bids from both the FMC and Doan — and after going through a second round of negotiations with the FMC — Hoyt found greater cost savings with the dealer. “(The FMC) was very competitive,” Hoyt says. “It then came down to the monthly rate and what the cost difference would be over the course of the multiple lease terms.”
Lowry put the company on a program to lease Silverado 1500s, about half its fleet, while the other half remains with the FMC. In the process, the company found that the dealer offered many of the same fleet management services as its FMC.
In addition to the cost savings, Hoyt notes the personalized service at Doan. While her contact at the FMC might have to go through another layer of management for an answer, “Nick is quick to respond to a need, an answer to a question, or with a decision,” she says.
Lowry sees fleet management services growing at the dealership level, particularly for GM, which is set to reenter the medium-duty truck market this year with the Silverado 4500HD and 5500HD.
“It's going to allow us to get back a lot of customers that left because we didn’t have the 4500-5500,” he says.
“In a couple years, I think we’ll see a real paradigm shift,” Lowry says. “I think a majority of dealerships that are doing fleet and commercial will move in this direction. And the more we’re able to extrapolate the true costs that a fleet is paying, it just makes sense.”