Is It Time to Mothball, Sell, or Return?

Posted on August 21, 2009 by - Also by this author

Page 1 of 2

Each vehicle in your fleet directly contributes to your bottom line profitability. A productive vehicle is obviously increasing your bottom line while unproductive vehicles are chiseling away at your profit because there are expenses that continue even if the vehicle is underused. This includes insurance, vehicle registration fees, and even maintenance to keep the vehicle in good shape and ready to roll just in case.

Determining Vehicle Profitability

Before you can take any action, you must know whether a vehicle is profitable, marginally so, or a cash drain on your operation.
There are two methods to evaluate profitability: Actual cost or estimated cost. Once you have determined your monthly operating expenses using either method, you can divide that number by the number of days in a month and determine the estimated amount of overhead a specific vehicle needs to earn per day.

If the vehicle is rolling, it is assumed that the client in the vehicle is paying for the chauffeur’s wages and the fuel consumed. However, the insurance, vehicle payment, registration, and repair and maintenance (R&M) are all overhead costs that must be paid for using your gross profit.

It is important to note that while the chart on the right shows actual expenses in a single month, each vehicle will need a set of tires and several oil changes per year that are not reflected in the chart of actual expenses. This can easily add another $400 per month in operational costs and cut your gross profit in half in the sample chart.

The estimated chart uses the 2009 IRS standard of 55 cents per business mile driven as an estimate of the cost of fuel, maintenance, and wear and tear. Payroll expenses are workers’ compensation insurance and the employer’s portion of payroll. Also remember that each vehicle must contribute to mortgage or rent payments and the salaries of non-driving support staff.

The Vehicle is Losing Money

If you determined this, you must stop the bleeding immediately just as you would a human because the result of uncontrolled bleeding in either case is death. The most obvious option is to sell the vehicle immediately. The fastest possible sale is probably most likely achieved by listing the vehicle on eBay. You should hope for a buyer far away from your community to avoid someone buying the vehicle and turning around to compete against you with your former vehicle.

Traditional sales methods such as For Sale signs, used car circulars, and classified ads also may be employed. If you owe more than you can obtain from selling the vehicle, you will have to proceed based on your financial situation. One option is to sell the car anyway and come up with the difference out of pocket to pay the finance company and obtain the title for your new buyer. This keeps your credit clean while eliminating the debt.

Another option is to voluntarily return the car to the finance company. While this might cause a blemish on your credit, it may mean the difference in long-term survival. If you are optimistic that the economy will rebound, you may want to consider storing the vehicle and preserving it for later use if the car is paid off, nearly paid off, or can be paid for by other vehicles in your fleet. 

View comments or post a comment on this story. (0 Comments)


Miles and Money

More News

Turtle Top Minibus Shuttle Retains Immaculate Status

Vehicle Pick of the Week: If you’re in the market for a used vehicle that’s been treated right, this Ford F-550 is a candidate.

Mercedes-Benz S-Class Thinks Smarter, Not Harder

Vehicle Review: The new version can self park, slow down automatically, and avoid crashes better than ever.

Cadillac CT6 Has Clever Surveillance Feature

Vehicle Review: Owners can use four of the vehicle's cameras as a built-in security system.

Chauffeurs Choice: Jaguar XJL Versus Audi A8L

Many find it difficult to decide between the two due to their cutting-edge styling and attractive chauffeur programs on offer.

1977 Town Car Was Largest Car On Domestic Market

The sales brochure sums it up: “Words can only suggest what the Lincoln Continental is. To really own this car, you have to drive it."

See More News

Facebook Comments ()

Comments (0)

Post a Comment



See More

LCT Store

LCT Magazine - March 2017 $12.95 INT'L LCT SHOW ISSUE COVER STORY: * Innovate or Die: Show To Be a Business "Disrupter" * *
LCT Magazine - February 2017 $12.95 NEW MODELS ISSUE COVER STORY: * Fleet Vehicles Preview * *


Experience the three annual industry events for networking for business, showcasing vehicles and products, and getting the tools for success.

Read About Your Region

What’s Happening Near You?
Click on any state to see the latest industry news and events in that region.

More From The World's Largest Fleet Publisher

Automotive Fleet

The Car and truck fleet and leasing management magazine

Business Fleet

managing 10-50 company vehicles

Fleet Financials

Executive vehicle management

Government Fleet

managing public sector vehicles & equipment


Work Truck Magazine

The number 1 resource for vocational truck fleets

Metro Magazine

Serving the bus and passenger rail industries for more than a century

Schoolbus Fleet

Serving school transportation professionals in the U.S. and Canada

Please sign in or register to .    Close