SAN ANTONIO - All HVAC contractors have similar goals, including increasing revenues, reducing expenses, improving cash flow to fund growth, and improving employee retention and recruitment. According to some, all of these goals can be achieved by implementing one thing: fleet leasing.
Some contractors choose to purchase their fleet of vehicles, enjoying the benefits of depreciation for tax purposes, while other contractors turn to leasing in an effort to keep a newer fleet of vehicles and have less initial purchase costs. Arguments can be made for both ideas, but if you are Tiffany Saucedo, account executive for Enterprise Fleet Service, the answer is obvious: leasing.
“Many contractors we meet will buy a truck or van, run it until the wheels fall off, and buy another one,” she told attendees of her seminar at the Air Conditioning Contractors Association (ACCA) of Texas/Associated Plumbing-Heating-Cooling-Con-tractors (APHCC) Texas Annual Conference & Tradeshow in San Antonio. “Vehicles have built-in obsolescence, often 95,000 miles on gas engines.” She noted that contractors often keep vehicles well past their useful lifespan, which winds up costing them more to maintain and replace.
Saucedo said there are many benefits of a fleet leasing plan, including:
• Vehicle replacement strategy
• Increased cash flow
• Elimination of maintenance surprises
• Maximized resale value
• Control of operating costs
“By having a plan in place, you can also factory order each vehicle ahead of time rather than buying it off the lot, which involves many dealer expenses,” she said. “Contractors can pay an average of $500 less per vehicle and get the exact equipment they need. And pre-ordering can lock in the price.”
Saucedo gave an example of the typical depreciation, maintenance, and fuel costs of a pick-up truck (see Figure 1). As the vehicle gets older, its depreciation levels off while maintenance and fuel costs continue to rise. Between the third and fourth year, the vehicle’s engine needs more service or possible replacement, which means it is time to replace the entire vehicle (see Figure 2).
“The average monthly costs for a 2007 Dodge Dakota ST Club Cab would be $902.07 based on a seven-year life,” she said. “The costs for an Enterprise three-year lease program averages $879.98.” She showed the savings for a business that leases 45 vehicles, a combined total of $11,929.
“We finance the vehicle down to a book value that we can all agree upon,” said Darren Coughlin, Enterprise regional sales manager. “The contractor is basically financing down to a book value [when the vehicle is turned in] instead of down to zero.
“We also try and get the best resale value for the vehicle because it benefits our own bottom line. Usually we can get an average of 18 percent higher than normal auction prices.”
Plans like the Enterprise Fleet program are all inclusive, too. Routine vehicle maintenance, i.e., oil changes and filter replacement, and replacement of brakes and tires are all included in one monthly fee, an average of $125 for a $25,000 vehicle. Most major automotive service companies honor the program and the only costs incurred by the contractor are license fees and fuel.
Coughlin noted that Enterprise already has 200 ACCA contractors on the program, involving 3,000 vehicles.
“The fleet program allows contractors to spend their time growing the business versus managing a fleet of vehicles,” Coughlin said. “And it increases cash flow because you only pay for what you use, you are on a fixed and budgetable maintenance program, and you reduce your overall holding costs.”
Editor’s note: The NEWS has a new online survey at www.achrnews.com. Visitors are encouraged to click on “Survey” in the upper left corner of the home page and answer questions regarding vehicle purchasing versus leasing. We encourage all readers to participate in the survey, which runs through May 21.
Visit www.enterprise.com/fleets for more information on the Enterprise Fleet program.
Publication date: 04/30/2007