Surplus vehicles have always been a thorn in the side of the fleet manager. Drivers leave the company for one reason or another, and fleet managers must decide what to do with their vehicles.
Fortunately, regular fleet policy can provide a process by which vehicle use or disposal is handled. But what about executive vehicles? Executives are almost always provided a vehicle as part of an overall compensation package, and therefore, a company-assigned vehicle involves issues far more personal than that of a sales or service representative. It is a challenge, but there are options fleet managers can explore.
Most companies have written fleet policy documents in which the assignment and use of vehicles is covered in detail. Sales, service, or delivery vehicles are usually provided via a vehicle selector, from which a driver chooses among two or more make/model combinations. The key point is that the overall mission of the driver and the vehicle is generally the same no matter what choice is made.
For example, the company may have sales representatives whose job is to visit customers, sign up new business, deliver marketing materials, and occasionally entertain clients. The selector might offer three models, all four-door sedans, the differences between them merely style and trim.
Fleet policy permits the driver to choose from the approved selector, and a vehicle is assigned to each individual. Because the missions of both the driver and vehicle are the same, a number of options are available to the fleet manager to handle vehicles that become surplus when the driver leaves the company.
Executives are also covered in the policy. However the circumstances are entirely different. The only "mission" executive vehicles normally fulfill is providing an incentive in recruiting, hiring, and retaining scarce executive talent. Executive vehicles are most often strictly compensatory in nature. For that reason, options for fleet managers in handling surplus fleet vehicles are usually not available for their executive counterparts.
How Companies Provide Executive Vehicles
Companies provide vehicles — or provide for vehicles — to executives in a number of ways:
- Dollar Limit. Stipulating a dollar value limit and allowing the executive to choose any vehicle he or she wants, provided the cost remains within the limit. The vehicle is acquired and provided by the company.
- Selector. Providing a selection of luxury or high-end vehicles. This method is somewhat rare; however, it is still done in some companies.
- Monthly Dollar Limit. Provides a monthly dollar limit for the lease of the vehicle. The executive can choose any vehicle desired, provided the monthly cost remains within the limit.
- Reimbursement/Allowance. The company reimburses the executive for the cost of a personally acquired vehicle themselves. The amount provided is covered in the policy.
Each method of providing vehicle incentives to the executive carries its own challenges when that executive leaves the company. Few of these challenges can be met in the same manner as the bulk of the company fleet vehicles.
When a sales or service rep separates from the company, the fleet manager has a number of available options in dealing with the surplus vehicle:
- If the vehicle has been in service long enough, and the amortized value is close to the market value, the vehicle can be sold.
- The vehicle can be transferred to another driver, whose current vehicle is nearing replacement.
- The vehicle can be provided to a new hire, whose own vehicle has been ordered, but not yet delivered, in lieu of a long-term rental.
- The vehicle can be kept in the fleet for use as a pool car. Such vehicles can be assigned to other employees on long-term assignments — again, in lieu of rentals — or used for occasional use by employees not assigned a company vehicle, but whose job requires occasional travel.
In each of these cases, simple arithmetic can determine whether the process is cost-efficient.
When an executive leaves the company, however, only one or two of these options are solutions.
Planning & Research Help Meet Vehicle Disposal Challenges
In all but one of the scenarios covered previously, the company provides the vehicle to the executive. (Reimbursement provides money, rather than the vehicle.) Because of the types of vehicles usually assigned to executives (high-end imports, luxury domestic), the challenges fleet managers face in disposing of the vehicle are more difficult than for regular fleet vehicles. However, they are not insurmountable with good planning and a little research.
For example, when the company provides a dollar limit — either total cost or a monthly stipend — and the executive can choose any vehicle within the limit, the types of vehicles in the executive fleet can be eclectic: large luxury cars and SUVs, sport imports, even exotics. There is a resale market for these vehicles; however, it takes a little work to find it.
It is certainly possible to offer the vehicle to the new hire, though it is unlikely it will be accepted, since a compensatory vehicle is by nature subjective rather than utilitarian. The third option available with non-executive fleet vehicles — providing the vehicle to the new hire in lieu of a rental while a new vehicle is ordered and delivered — is a good way to keep the vehicle in service for a period, while reducing the investment the company has in the vehicle.
Pool car use, of course, is not a reasonable option. Executive vehicles are usually far too expensive to own and operate. (Indeed, there would likely be a long list of employees looking to drive on company missions using an executive vehicle!)
So, then, what options do fleet managers have when an executive leaves the company, as well as the vehicle?
Options Available to Remarket Executive Vehicles
Most fleet vehicles are remarketed via auction to wholesalers and brokers, and to employees and drivers. Sale of an executive vehicle to company employees is always an option. As with regular fleet vehicles, selling executive vehicles largely depends on how long they have been in service and how much of the original value has been amortized, with the additional burden of its relatively high price.
There are any number of used-vehicle buyers, sellers, and brokers who specialize in luxury and exotic vehicles of the type executives often drive. Automotive Web sites, such as www.automotive.com and www.motortrend.com, offer classified ad pages on which executive vehicles can be sold. Additionally, there are local businesses that specialize in bringing luxury car buyers and sellers together.
One of the first places a fleet manager can look to dispose of an executive vehicle is the local dealer from whom the vehicle was purchased. While the typical fleet four-door sedan or minivan market can sometimes be flooded with inventory, newer, low-mileage luxury vehicles are usually in demand, especially at local dealerships.
Closed-End Leases Present Obstacle in Vehicle Disposition
Selling a vehicle leased under a typical fleet TRAC lease is almost exactly the same as selling a company-owned vehicle. However, in some cases, the company pays for an executive vehicle lease through a local dealer. These are most often closed-end leases with significant penalties for early termination making the disposition of an executive vehicle even more challenging.
Fortunately, outlets are available for this type of transaction as well. Web-based companies, such as www.swapalease.com, allow buyers and sellers to browse for the type of vehicle they are either trying to dispose of or purchase. The fleet manager can post an executive vehicle on this site, where customers willing to assume the payments can find it. Swapalease.com also features a section in which such vehicles can be bought and sold outright.
Fewer Vehicle Disposals Ease Fleet Manager Burden
Does a fleet manager (usually with little or no staff and a full calendar) have the time to effectively retail executive vehicles? On an occasional basis, yes. Most true executive fleets are few in number, and instances in which the vehicles become surplus due to the separation of the executive are fewer still and do not present an unreasonable burden on the fleet manager's time. Selling the occasional executive vehicle at retail is not a great burden.
Of course, the easiest circumstance to manage is reimbursement; the vehicle is not provided by the company and can be cut off instantly. Reimbursing, however, may place the company at a competitive disadvantage versus companies that offer a company vehicle to high-level executives.
As with most other fleet management functions, a step-by-step process should be in place before executive vehicles are even offered.
For executive vehicle programs in which the vehicle is provided by the company, via a cost or monthly dollar cap or a selector, the first step is to offer the vehicle for sale to the driver in the same manner as any good fleet program, If the driver isn't interested, one of the resale options described can help the company dispose of the vehicle.
For programs that allow the driver to find the vehicle locally, and in which the company pays for the lease, outlets on the Internet can put potential lessees in touch with the existing lessee (the company) to arrange a lease transfer. This may be difficult for vehicles leased through fleet lessors, which are usually loathe to become involved in retail credit and billing.
One method for a company to ease the potential risk of becoming stuck with a relatively new executive vehicle is to depreciate these vehicles at a rate different than that of the regular fleet. Paying the original value down more quickly can limit cash flow; however, it will help reduce the remaining cost to market levels more quickly and enable the fleet manager to sell an executive vehicle faster.
Remember, the compensatory nature of executive vehicles makes it difficult, if not impossible, to include transfer of surplus vehicles to new hires or entry into pool use. Executive vehicles are very personal and highly valued forms of compensation. Fleet managers should be prepared to deal with the circumstances when the executive leaves the company.