Cutting costs on the road - cutting company motor vehicle costs

Nation's Business, May, 1990 by Julie Candler

If the cars you're considering offer a choice of either a four- or a six-cylinder engine, you may find the better residuals in today's sixes. They perform better, experts say, yet their fuel-economy figures are almost at the levels of those for four-cylinder cars.

According to the Environmental Protection Agency's 1990-model ratings, for example, a four-cylinder Ford Taurus with a three-speed automatic transmission gets a combined city-highway rating of 22 miles per gallon (20 mpg in the city, 26 on the highway). An equivalent Taurus with six cylinders and a four-speed automatic is rated at a combined 23 mpg (20 mpg city, 29 mpg highway). The Chevrolet Lumina's four- and six-cylinder figures too are similar.

"We buy only six-cylinders," says Mary Haas of W.L. Gore. "I think we get a better resale. We used to have nothing but four-cylinder cars. We dropped them because we had so many problems with them. For the amount of miles our people had to put on them, those four-cylinder engines were overworked."

Many fleet managers leave the worry about residual values to others by leasing, and then leave the maintenance management to others through service arrangements. Haas is one such manager, and another is Sheena Franklin, fleet administrator for La Petite Academy Inc., a Kansas City, Mo., company with day-care centers in 29 states. "I read a lot of surveys of the advantages and disadvantages of leasing vs. owning," Franklin says, adding that she doubts she'll ever see evidence that owning is better than leasing. She leases 1,200 full-size passenger vans that are used to transport children from the day-care centers to schools in the morning and back to the centers later in the day. She also leases 150 vehicles for use by local managers.

Haas manages a fleet of 300 vehicles, including Ford Tauruses, Pontiac 6000s, and a few vans and pickups. She leases from Automotive Rentals Inc., in Maple Shade, N.J., and uses GE Capital Fleet Services, Eden Prairie, Minn., as a secondary source. "We think it's better to let the leasing company take care of the resales. They auction them off," she says. "We don't want to be a used-car lot, although our associates can buy the vehicles at the end of the lease if they choose to."

To cut operating costs, Haas' company recently began using the maintenance services of Consolidated Service Corp., in Elk Grove Village, Ill. One of the nation's largest maintenance companies exclusively for fleet vehicles, Consolidated has approximately 175,000 company-owned and leased vehicles under its wing. "Our services are beneficial for companies that operate nationwide or regionally--whenever vehicles are scattered," says Consolidated's president, Pat Starr.

Consolidated's chief competitors, Starr says, are companies such as GE Capital Fleet Services, in Eden Prairie, and PHH Fleet America, in Hunt Valley, Md. They offer full-service leasing, which includes vehicles, repairs, replacement vehicles, and all paperwork. With Consolidated, however, maintenance service is separate from the lease. Thus, if a fleet manager switches lease companies, the service affiliation with Consolidated can continue.