Why do otherwise smart fleet operators negotiate full-service leases using only big round numbers?

The most common reason is that they simply do not know their actual, detailed maintenance costs. In that situation, the leasing company has the negotiating advantage.

I recall a fleet maintenance discussion panel when one question after another from the floor dealt with costs. Leasing representatives on the panel were peppered with questions like how far will a clutch go? How much can we get out of a transmission?

The leasing panelists said the answers depended on the drivers and other operating circumstances. Those responses were true enough, yet unsatisfying.

But if a fleet operator were tracking his costs, he would already have the answers, and those answers would be specific, revealing, and often intelligent indicators of action that should be taken. And they would certainly enable him to negotiate a lease from a much stronger position.

“Fleet owners say, ‘Here are my costs’; fleet lessors say, ‘Here is my rate.'” That’s an old cliché in the leasing business, and leasing professionals know exactly what this insider observation means: costs and rates are two very different things. If you don’t know the first, you’ll probably pay too much for the second.

That’s valid whether you’re negotiating your first lease contract, renegotiating an existing contract, or seeking bids from other leasing companies. Even though the lessor does the maintenance, you’re still paying the bill. You should know exactly what you’re paying for.

That’s why smart lessees track vehicle costs closely, even when the lease is full-service and covers maintenance. Using maintenance software, you can see fleet trends, costs, and areas of exposure. You know which vehicles and components perform better than others. You can spot problem drivers who abuse equipment and drive up costs.

When maintenance is in house, that kind of first-hand knowledge enables you to reduce breakdowns and shift costs from emergency repairs to far more efficient preventive maintenance. In a full-service lease, the same information enables you to curb the costs of leasing company charge-backs — bills for work over and above regular maintenance as spelled out in the lease agreement.

Moreover, leased fleet operators who use maintenance software have a far greater understanding of their equipment’s utilization, frequency of repairs, fuel efficiencies, and areas of exposed risk and expense. For example, you can easily see how driver complaints and issues turned in on daily vehicle condition reports are handled and compare them with work actually done.

Maintenance documentation helps you hold your lessor’s feet to the fire. You can demonstrate that a lost or late load was caused by equipment downtime due to substandard maintenance or a lack of substitute equipment as called for in a lease agreement. And it’s important to remember that where liability and DOT compliance are concerned, you are ultimately responsible for the safe operation and condition of the fleet. Proficient use of fleet maintenance software can help prevent losses due to substandard maintenance even in a full-service lease.

Further, when a lease contract expires, you have the detailed knowledge to negotiate a new agreement more to your advantage. You’re able to analyze competing full service lease proposals and compare them with the cost of doing the work in-house. Knowing real fleet costs in granular fashion puts you in the driver’s seat, so to speak.

So why don’t more leased fleet operators use maintenance software?

Often, they simply don’t understand the need. In some cases, the leasing company doesn’t want to provide the necessary information – detailed maintenance and repair bills, for example. In others, the leasing company doesn’t have the information to provide. In either of these instances, you should consider leasing from someone else.

But for most leased fleets the necessary data arrives regularly. It’s in the leasing company bills that outline work performed and on which units. Those bills specify parts replaced, labor charges, and more. Many fleet operators simply sign the invoices and forward them for payment. They should be entering the information that they contain into a maintenance program.

Depending on the leasing company, those invoices can be submitted in digital form. In that case the data can be imported electronically to eliminate data entry — depending on the maintenance program being used, of course. If that isn’t possible, the information should be keyed in manually.

In every case, the information should be retained and analyzed by the fleet lessee. In the short term it will provide insight into ongoing equipment and driver performance. Long term it will be available for comparing the costs and terms of one lease with another or with other maintenance options.

Fleets are much more likely to get competitive leasing rates if they knows their real costs.

This Op-Ed appeared in Transport Topics on 18 February 2013. See the story:

Jack Boetefuer is CEO of Arsenault Associates, the maker of Dossier fleet maintenance solutions.