Lancer Insurance
Friday, June 14, 2024

TOPIC: How do you determine when it’s time to replace a vehicle or add a new one to your fleet? What factors and creative solutions influence your philosophy?

Lew Aflalo Fleet acquisitions and retiring company vehicles are handled in a variety of ways. Each sedan in our fleet gets about 75,000 miles/year, making for an average two-year lifespan. This is not a hard-and-fast rule because our vehicles are staged in different locations, as most of our chauffeurs bring their assigned cars home. The sedan is only used for one shift of the day, which extends the life of the vehicle, not only by reducing the miles driven but also because there is more attention and care given to the car when one person is responsible for it.

Industry trends and the discontinuation of models affects our purchases. For example, after an in-depth analysis—including price, warranty, comfort, and style—and conferring with industry colleagues and dealers at the trade shows, we decided on the Lincoln MKT Town Car to replace our retired Town Cars in 2013.

Our philosophy does differ with our specialty vehicles, as the monetary investment coupled with the reduced use allow for an extended life cycle for the vehicle. With our 24-passenger party bus, we chose a complete refurb of the interior and a new exterior paint job, rather than purchasing a new bus. But when it came time to replace one of our traditional stretched Town Cars, which gave us seven years of service, we decided to purchase an eight-passenger, five-door stretch limousine on the Lincoln MKT chassis.

Lew Aflalo, General Manager
Green Light Limousine in Danbury, Conn.

Selim Aslan We do not have mileage or age limits on vehicles, but we usually try to get rid of them after three years; in that time, we can easily put 200,000 miles on our sedans. As soon as we acquire a new vehicle, we put it to work and utilize it the most, using our older vehicles as needed. As the vehicle gets older, it causes more headaches and expenses, so it is not profitable to hold on to it after some point.

Our replacement philosophy differs among vehicle types. Due to pricing factors and less utilization, SUVs can be used for five years. For buses and limousines, unlike sedans, older models are acceptable in the industry as long as they are well-maintained.

When we first started, we used older vehicles. As the company grew and became more financially stable, we purchased new vehicles. These days, when it comes to replacing or adding a vehicle sooner than planned, we always try to have back-up vehicles so we are prepared for the unexpected. We have a couple of credit resources that we can utilize, or in the worst-case scenario, we rely on our affiliate network until we can replace a vehicle.

Selim Aslan, President
Men In Black Transportation in San Diego, Calif.

Terry Cox South Florida is a unique market, and having the flexibility to add or subtract vehicles is vital to both the bottom line and ability to withstand market flux. Our sedans and SUVs are rotated from previous year to incoming year; for example, the 2015 models will be replaced with 2016 cars, so mileage doesn’t factor in the rotation.

We do not have the luxury to replace high-ticket minicoaches, Sprinters, and stretches as frequently as sedans and SUVs. Unless the vehicles are totaled, repairs are the most cost-effective operational means. We have a revenue formula for replacing, adding, or retiring vehicles. Adding sedans and SUVs is determined by a formula of daily/monthly revenue, while larger vehicles would be added only if a new account revenue warrants. Our present system for sedans and SUVs has been very successful over the past four years and do not plan on any changes to it in the immediate future.

Terry Cox, Director of Global Services
Worldwide Transportation in Miami Lakes, Fla.

Howard Gogel Our approach has been steady for years. We upgrade our vehicles at certain mileages: sedans at 225,000 to 250,000 miles; SUVs, stretches, and vans at 200,000 miles; minibuses at 300,000 miles; and coaches at 100,000 miles. We have found that these numbers give us maximum return before the “big things” start breaking.

Since Lincoln discontinued the Town Car, it has been a free-for-all within the industry to find a replacement. We stayed with Lincoln—first the MKT and then the MKS. The MKS will be discontinued this year and replaced by the beautiful Continental, which looks like a Bentley. We’re planning to dance around our mileage parameters until this car is available.

I will not “panic buy” a vehicle. It is a decision that will be with you for two to five years, which is too long to deal with a mistake purchase.

Howard Gogel, Owner
My Limo in East Hanover, N.J.

Kathy Grady When it comes to replacing vehicles within our fleet, I have always considered two main factors. First, we look at what is dictated by the market, the industry, and our customers because if you are not meeting your clients’ expectations, needs, or wants, they will find it elsewhere; loyalty only goes so far. This also applies to your affiliates’ vehicles. The market is constantly changing, including more body styles from European manufacturers entering the North American market. It doesn’t take long before your fleet looks outdated, regardless of low mileage or painstaking maintenance. This will affect how you present yourself—and your ability to charge market value rates for your service.

The second deciding factor is cost. A small business with a smaller fleet has to maximize every vehicle, whether it is new or used. It is not always economically feasible to purchase or lease brand-new everything. With this in mind, you have to balance the needs of your clients and your ability to get the most out of your purchase to make it financially viable. You have to decide what your company can provide to remain current, relevant, competitive, and ultimately successful.

Kathy Grady, Owner
Northern Lights Limousines in Edmonton, Alberta

George Jacobs A vehicle must be mechanically and cosmetically pleasing. If its seats are worn or the ride is rough, the vehicle must be replaced. We use miles and age as guidelines, but the decision to replace a vehicle is based upon eyes and ears, as well as how it feels in use. We have seen high-mileage cars that looked and rode great and thrilled the clients; conversely, we have seen lower-mileage cars that just had to go. The decision should be completely objective. Think: “How would I view this if I were the client?”

We do not need to reinvent the wheel but we definitely listen to both clients and industry peers when choosing vehicle types. More feedback is better than not enough, and some of our peers are trendsetters. As an example, our fleet was 100 percent limousines in the ’90s—until our East and West Coast affiliates wanted sedans, so we complied. Today, only 10 of our fleet is limousines. As SUVs, party buses, and Transits have come along, we have adapted easily.

George Jacobs, President
Windy City Limousine in Chicago, Ill.

James P. MacGilvray Jr. As all of our vehicles are independently owned by our chauffeurs, our policy is that all sedans cannot be any older than five model years, and SUVs, Mercedes, and BMWs can be no older than six model years.

We do, however, reserve the right to ask our chauffeurs to update their vehicles if we deem them to be in a condition that is unsuitable to our standards, and it does not seem likely that repairs would be useful.

James P. MacGilvray Jr., President
Partners Executive Transportation in Whitestone, N.Y.

Glenn Stafford Our vehicles are replaced when they run out of warranty—three years max for sedans and SUVs, five years for Sprinters and limousines.

The best advice we’ve been given was from Scott Solombrino in the late ’90s: “Never finance your cars for more than three years.” We adopted that philosophy and, although we immediately had to cough up more in payments, the vehicles became assets around 28 to 30 months. Its disposal actually generates cash flow for its replacement’s down payment, or for another need. Under this theory, reinvesting the residual into the new vehicle will eventually result in paying cash for new vehicles (keeping the budgeted payment amount escrowed). The upside is having a new fleet under warranty, thereby eliminating reliability/maintenance issues. Basically, we only pay for tires, brakes, and fluid maintenance with warranty vehicles.

Glenn Stafford, President
Stafford/Love Limousine in Richmond, Va.

Barbara White Our corporate customers have come to expect late-model vehicles. Our replacement rule of thumb depends on the vehicle types and ages: three years for sedans, typically four years for SUVs, up to five years for vans, and six to eight years for minibuses.

Having an on-site mechanic has been one of our best investments, as the mechanic can dedicate his time to keeping all vehicles in excellent running order and getting them back on the road sooner. Due to our growth, we’ve moved to a building large enough to house our 32-vehicle fleet, and keeping them out of the elements has also reduced maintenance. With this in mind, you have to balance the needs of your clients and your ability to get the most out of your purchase to make it financially viable.

Our approach has essentially remained the same. Vehicles are added when we see a consistent usage of IOs or when we secure a new account that warrants additional vehicles. A finance company handles all of our purchases, so we can have a contract on a new vehicle within 24 hours, which is delivered shortly after.

Barbara White, Co-owner and Managing Director
VIP Transportation Group in Orlando, Fla.

We’ve loved hearing your answers to our benchmarking questions since debuting this interactive section—but we always welcome suggestions for future topics, too!

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