Vehicle acquisition is a challenging task in 2021 as the economy continues to recover from COVID 19 and causes shifts within the automotive industry. At the same time, in order to take advantage of this new economic boom, your fleet management company needs to reestablish your corporate fleet.
Here’s how to make it happen without spending a fortune in overall costs:
What Does Vehicle Acquisition Mean?
Vehicle acquisition involves acquiring new vehicles for your fleet. However, this is an oversimplified definition. In reality, there are countless working parts involved in vehicle acquisition that require substantial time and effort.
At the same time, putting time and effort into vehicle acquisition is key to acquiring cost-effective vehicles that will meet your needs over an extended period of time. Specifically, vehicle acquisition involves choosing which vehicles to buy, when to buy them, and at what price.
Current Challenges in Vehicle Acquisition
It is undoubtedly a challenging time when it comes to factory ordering your fleet. A lot of the challenges currently present are a result of the COVID-19 pandemic. For instance, the first challenge is demand versus supply.
Many companies sold their fleets to earn enough money to keep their doors open throughout the economic recession. Furthermore, many companies weren’t even utilizing their fleets due to lockdown and quarantine orders all over the world.
What this means is that companies are now trying to build their fleets back as the economy recovers from the pandemic. Normally, meeting this new and higher demand wouldn’t be too difficult, but the pandemic has also contributed to supply chain issues.
Take the chip shortage, for instance. Demand for used cars is at an all-time high since new cars are limited due to the chip shortage. This gives companies less inventory and options to work with when building their fleets and drives up prices.
Think about it the chip shortage affects motor vehicles including:
- All Light duty vehicle options
- Alternative fuel vehicle/zero emission vehicle
- motorcycles
Develop a Transportation Fleet Capable of Meeting Your Needs
Every fleet is different since every company has different needs. So how can you develop a fleet that’s able to meet these needs? Here are some factors that you should consider when building your fleet:
- Size, style, and carrying capacity: Some companies will need larger vehicles to carry products and supplies. Depending on the type of products and supplies, a truck or SUV may meet your needs.
- Routing, roads, and terrain: If your vehicles need to be driven off the road, you should consider a 4WD or AWD vehicle. On the other hand, if your vehicle will need to be driven on heavily trafficked urban roads, you should consider a compact vehicle.
- Fuel: There are more options than just diesel or gasoline these days. Instead, there are also hybrid or fully electric vehicles to consider. Consider hybrid vehicles, if available if you expect high fuel costs due to high mileage driving practices.
- Safety: Safety should be a priority for all fleets. And while standard safety ratings are helpful, there are ways that you can go above and beyond when it comes to the safety of your fleet vehicles. For example, safety features like brake assist, blind-spot warnings, lane-departure warnings, adaptive cruise control, and forward-collision warnings can be extremely beneficial.
- Maintenance: While the initial costs of purchasing a vehicle are high, maintenance is a significant cost as well. For this reason, you need to consider the maintenance costs of potential fleet vehicles. Some vehicles are made with more expensive parts and thus require more expensive repairs.
Purchasing Vehicles & New Technology
While most people assume that you need to purchase your fleet outright, there are other options to consider, such as leasing. Depending on how you use your fleet, leasing may be a more economical option and is something to consider.
From there, the question is new or used?
While used vehicles come at lower costs, they also come with fewer technological features. For instance, some of the hottest technological features in new cars these days include mobile application connectivity, stolen vehicle tracking software, vehicle cameras, and vehicle warning systems.
The Vehicle Life Cycle
To master vehicle acquisition, you need to understand the life cycles of your vehicles. Vehicles don’t last forever and you need to be able to track and predict the life cycle of your vehicles so that you can plan to replace them. To better predict the life cycle of your vehicles, you need to collect and analyze data to track trends and patterns.
Here are some of the different variables of your fleet vehicles that you should be tracking:
- Mileage: You should keep track of how many miles your vehicles are being driven. A lot of mileage in a short period of time can quickly wear down a vehicle — shortening its life span. Generally speaking, you can expect a vehicle to last about 150,000 miles before replacing it.
- Vehicle age: You should keep track of the age of your vehicles. While you may assume that the cost of ownership increases as the car ages, this isn’t always the case. In fact, the total cost of ownership tends to decline after about nine or 10 years for light-duty fleet vehicles that travel about 12,000 miles per year. However, you still should be wary of vehicles with ages that are well into the double-digits as they will likely need to be replaced relatively soon.
- Cost per mile: You should keep track of how much you’re investing in a vehicle compared to how many miles it’s driven. Your operating costs include fuel costs, maintenance costs, insurance premiums, registration fees, taxes, depreciation, and tax credits. Compare these costs to how many miles the vehicle is driven to determine the cost-effectiveness of the vehicle better.
- Vehicle history: Not all vehicles are the same which is why you should also keep track of the vehicle’s unique history. Make sure that you track relevant information about the fuel consumption, repair history, inspection history, accident history, compliance issues, and more. An accident-free vehicle with consistent maintenance has a longer lifespan than a vehicle involved in a major accident or a vehicle that hasn’t been well maintained.
Vehicle Replacement Strategies
Knowledge is power, and the knowledge you gain by tracking your fleet helps you come up with the most cost-effective vehicle replacement strategy.
Here are three different strategies for replacing the fleet vehicles that you should consider:
Strategy 1: Vehicle Age or Mileage
In this strategy, you set a predetermined age or mileage at which time the vehicle would be replaced. For instance, many companies replace their vehicles after six years or 250,000 miles.
This is a very easy strategy to implement and track since it only involves a single variable. However, there’s so much more to a vehicle than its age or mileage, and you could end up replacing vehicles earlier than necessary — spending more money in the process.
Strategy 2: Life Cycle Cost Analysis
In life cycle cost analysis, you analyze the vehicle’s total ownership and operating costs. You will need to analyze factors including vehicle purchase cost, maintenance expenses, miles traveled, hours used, downtimecosts, fuel expenses, annual depreciation, obsolescent costs, and salvage value.
While this strategy is comprehensive, it is subjective since assigning an exact number to downtime costs and obsolescence is difficult.
Strategy 3: Cost Threshold Analysis
You would need to replace the vehicle when the cost to repair them exceeds a predetermined threshold amount. You will need to analyze historical trends in repair costs overtime to set a reasonable threshold.
A common approach involves considering replacing a vehicle with maintenance costs that are over 30% of the vehicle’s residual value.
Vendor Assessment: The Basics
Once you have chosen the right vehicles for your fleet and have come up with a replacement strategy, you next need to figure out how these vehicles are going to get to you.
In the current shipping environment, this is easier said than done. You will likely need to work with a logistics provider that works in vehicle transportation. RPM, for example, is a top logistics provider handling thousands of shipments daily.
Vendor Assessment: Feasibility
Not every logistics provider meets your needs. This is especially true now as the shipping industry deals with a driver shortage, limiting loads and increasing shipping times.
You need to look for a provider with an extensive network of monitored and vetted carriers to work with. RPM works with over 30,000 carriers to meet the needs of our clients.
Thanks to our network of professionals, it’s likely very feasible that we can get your fleet vehicles from point A to point B.
Vendor Assessment: Options
Finally, you need to look for a vendor that offers a wide range of options to meet your vehicle transportation needs. For instance, are you looking for an open or closed transport to keep your fleet safe and secure during transit? Are you looking to transport a full truckload of fleet vehicles or single vehicles?
No matter what your needs are, RPM has options and solutions that will work for you. We understand your business and frequently provide fleet management services for our clients.
Creative Transportation
At the end of the day, there is no one-size-fits-all approach to building and maintaining a corporate fleet — so don’t be afraid to get creative. While purchasing the hottest new vehicle models with the latest technology may be tempting, this doesn’t always make sense. Instead, you should make sure that each vehicle is a necessary investment for your company that meets your transportation needs.
Additionally, you may need to get a little creative when actually transporting your vehicles to their respective destinations. Working with an experienced and professional logistics company can help you overcome the current challenges within the industry with creative and cost-effective solutions.
Conclusion
Dealing with vehicle acquisition in the current environment is incredibly challenging — but it doesn’t have to be with the right support. For timely and cost-effective support for your vehicle acquisition and fleet managementefforts, reach out to RPM for customized solutions and quotes.
Sources:
How to Select the Best Vehicles – A Fleet Management Guide | AMFA
The Benefits From Lifecycle Cost Analysis | Fleet Maintenance
How to Manage a Fleet of Company Vehicles? | FleetRoot