Fleet Reimbursement Analysis

Holman’s Strategic Consulting group provided an educational client with a comprehensive analysis showing the quantitative and qualitative comparisons of using fleet vehicles versus reimbursement.

Fleet Background

This particular customer is in the education industry with a fleet of 700 vehicles. 60% of their fleet was made up of Dodge Caravans and Ford Escapes used to carry samples and products.

Objective

The company was acquired and immediately following acquisition, a mandate was set forth to cut costs everywhere, including fleet operations. The new ownership wanted to move their vehicles from fleet management to reimbursement. They viewed this transition as a major cost savings and planned to reimburse their drivers $310/month, plus $0.17/mile for fuel.

Approach

The client’s fleet team decided to utilize Holman’s Strategic Consulting group, relying on us to run a reimbursement analysis showing the quantitative and qualitative comparisons of fleet versus reimbursement. The client understood the impact of the qualitative items, but the new ownership was most concerned with cutting costs, convinced that moving to reimbursement was the best way to do so with their fleet.

The fleet team understood that the new ownership was open to new ideas. Holman performed site visits, held discussions with drivers, and performed ride-alongs to understand how the vehicles were being used. Based on our assessment of the fleet, we determined the client no longer needed the same amount of cargo space that they once did. Our proposal was that they replace all of their vehicles with Ford Fusions. Doing so would enable the client to negotiate a better volume discount from the OEM, incur lower annual maintenance costs, improve fuel economy, and realize gains on their current vehicle sale proceeds due to the resale market still being strong. We also suggested a monthly driver contribution deduction.

• More efficiently run by a fleet management company.
• Demonstrated best cost savings approach was not reimbursement.
• $2,141,790 in total life cycle savings.

Projected Savings/ Benefits and Results to Date

The analysis and recommendations showed $2,141,790 in total life cycle savings ($535,447 annual savings) for a company-provided Ford Fusion vs reimbursing their drivers $310/month, plus $0.17/mile for fuel. Through this fleet reimbursement analysis, the client could see that their fleet would be more efficiently run by a fleet management company than with reimbursement, and found themselves extremely happy with the service provided by Holman over the years.

 Corporate Fleet Leasing vs. Reimbursement

With the help and involvement of the client, we took a deep dive and explored multiple options to determine the best cost savings source for them:

• Closed-end leasing
• Lease (with current models) vs reimbursement
• Lease (with new vehicle model) vs reimbursement
• A mix of closed-end and open-end leasing

Our customer’s fleet team was able to demonstrate to the new ownership that the best cost savings approach was not reimbursement, but instead, replacing their current fleet with new, more fuel-efficient models and sticking with open-end leasing.