There's no doubt about the tough decisions today's businesses need to make. "Getting your products to market is the number one component of shareholder value," says Gary Petty, president and CEO of Alexandria, Virginia-based National Private Truck Council.

Advantages exist to either purchasing or leasing fleets, say the experts. Choosing among the options can be daunting. "It's a very complicated process," says Dave Lefever, executive director of Iselin, New Jersey-based National Association of Fleet Administrators (NAFA). "The challenge is the variables are very difficult to prove. A supplier can come in saying he can save you 25 percent on some aspect of your operation, but you don't really know until you actually work with him." More corporate fleets use these outsourced services than in the past, suggesting operational or financial advantages.

"One of the biggest reasons companies come to a fleet management company is to reduce costs," says Steve Greenway, strategic consultant for Minneapolis-based GE Commercial Finance Fleet Services.

GE offers a seminar to potential clients. "This is part of our sales process," says Greenway. "It's not really a matter of who has the cheapest truck to offer-it also involves things like how to get the vehicles licensed and to your location and then how to get rid of the old trucks." The one-day seminar is designed to help everyone involved in these decisions, including fleet management personnel, the CFO, treasurer and the tax director.

The responsibilities of today's fleet manager are far different and more complex than those of predecessor managers. "Years ago the fleet manager ordered pretty much whatever fleet vehicles he wanted to," Lefever says. "But with the bad economy and tight money, fleet managers now work closely with corporate finance people and risk managers in deciding which vehicles will be acquired and how long they will be kept."

Today's fleet managers tend to be less involved in the smaller day-to-day activities if they are outsourcing some components of management. Says Greenway: "They are involved more with the strategic direction of the fleet and they still need to make some of the high-level decisions like what kinds of vehicles they will need."

Historically, the focus of fleet management was on asset management, says Paul Lauria, president of Gaithersburg, Maryland-based Mercury Associates, Inc., a fleet management firm. "This means the acquisition, care, upkeep, replacement and disposal of vehicles and equipment," he says. Fleet managers are still expected to understand how to buy the right types of vehicles and how to acquire them at a good price, how to get them maintained and repaired and when to replace them. "These things are all in the price of admission," Lauria continues. "But fleet managers have to think like business managers. They are fleet regulators rather than providers of services to fleet users. This implies a much more collaborative posture, which is more customer-service oriented."

Reasons for leasing

Leasing vehicles, in general, is common for most of NAFA's corporate members with sales and service fleets, Lefever says. "This is the method by which they obtain and finance vehicles," he says. About half of NAFA's corporate members also use a leasing company for a broad range of additional management services that might include maintenance or accident management, expense account and reconciliation operations and re-selling vehicles to employees.

Some say leasing is a trend they see in the industry. "When companies lease their vehicles, they tend to turn them over more quickly than organizations operating their own fleets," says Lauria. "All the maintenance and repair tends to be performed at retail or commercial repair shops and not at in-house maintenance facilities."

Another trend contributing to the greater interest in outsourcing is the recognition that companies need to focus on their core business in order to improve financial performance and deal with the fiscal and economic challenges of the last three years, Lauria notes.

All in the family

While leasing works well for some companies, fleet ownership is an option of choice for others. Petty notes private fleets are on a growth mode from the standpoint of private fleets adding to their own capacity. "Companies that in the past gave up their private fleets to outsourcing are now re-visiting the idea of having their own trucks again and managing them, at least in part," says Petty.

Petty cites today's capacity challenges and a desire to maintain control as some reasons companies choose to own their fleets. "It's such a problem in some markets to the point that one cannot buy truck capacity from any source at any price," he says. But it's not an either-or question and companies will operate blended fleets. "Because of the configuration of their distribution network and the range and complexity of their products they are transporting, some companies might have private fleet drivers doing their premium accounts and dedicated contract drivers doing their dry freight runs," Petty says.

Choosing the right solution

Privately held Hallmark Cards in Kansas City operates in-house fleet management of its company-owned sales fleet of 1,100 mini vans and sedans. "The numbers are very close for either leasing or purchasing vehicles," says Debbie Mize, corporate services manager, fleet & relocation, who manages a department of two and one-half people. "There's not a huge advantage to either one. Cost of funds is a big part of that decision, as well as having the systems in place to manage your fleet effectively in-house. If a company is not willing to support the staff to manage everything properly in-house, you have no choice but to lease." Mize says there is a slight advantage, per car, for company ownership-at least for Hallmark.

"You have to look at your overall costs of operation such as the entire lifecycle cost of the vehicles, the way the process is being managed in-house versus leasing, the cost of interest, the acquisition cost, resale value, and all your operating costs such as gas, oil maintenance and accident repairs," Mize says. "You also have to include the cost of your staff and their benefits."

Sidebar: Apple Opts for Leasing High-Image Vehicles

Apple Computer, Inc. has a professional image to maintain and this is evident in its leased fleet of 500 vehicles used for sales personnel. "One of the top benefits leasing vehicles offers us is the ability to maintain our drivers in high-image vehicles," says Sandra Koelzer, global supply manager for the Cupertino, California-based company.

"We are involved in the movie, music and high-tech R&D industries," continues Koelzer. "We have extreme cost management parameters here at Apple. The leasing program combined with the outsourced fleet management component through GE Commercial Finance Fleet Services allows us to operate newer vehicles in order to maintain our corporate image."

Easy as pie
One of Koelzer's main objectives is to ease the pain points for Apple's sales force. "We want the management of the company car to be as transparent as possible because we just want our sales people out there selling iPods, computers and carrying on with their business, so they don't have to give too much thought to car management," she says.

Then, of course, there's the big headache of vehicle disposal. "This is a soft cost in the analysis--but it is a gigantic process issue," Koelzer says. "It takes a lot of expertise to get the best value in a disposal and you have to stay current and active in re-marketing. It takes a lot of time to do the paperwork--let alone the necessary wheeling and dealing."

Another extremely labor- and time-intensive process is arranging to pick up vehicles and to get them to auction. "Then there's the business of dealing with brokers. All of these things are necessary parts of the fleet manager's job," says Koelzer. "We are so grateful to have the fine re-marketing function we get from our vendor."

E-Z pass
Apple has been operating a leased fleet since 1981. "Our finance department does regular analyses of leasing versus buying," explains Koelzer. "We look at the value of these vehicles after we've used them for two or three years, examining the lifecycle of the vehicle. We determined that if we leased and disposed of the vehicle within three to four years, this would be the most cost-effective result for us."

Driving exclusive-looking vehicles like the Dodge Magnum and the DaimlerChrysler 300, Apple's sales force can drive in style and keep a low priority on maintenance concerns. But this does not mean they are not encouraged to do regular maintenance checks on their vehicles. "We want our sales people to change their oil, report accidents, and drive safely," Koelzer says. "But we don't want car management to be burdensome to them."

This is where a good fleet management provider enters the picture. "We encourage our drivers to contact GE's call centers for answers to any questions they may have," explains Koelzer.

"We have to have our leasing and fleet management company be as responsive as I would be," says Koelzer. "This means when someone calls in with a problem or concern, we take care of the problem right away; we just can't afford to take days or weeks to resolve something." -April Terreri