Automotive Fleet

NOV 2013

Magazine for the car and truck fleet and leasing industry

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FUEL MANAGEMENT TABLE 4: CONVENTIONAL- & ALTERNATIVE-FUELED VEHICLE ACQUISITION COST COMPARISON Vehicle Type Acquisition Cost (Conventional Fueled) Current Model Alternative-Fuel Model Acquisition Cost (Alternative Fueled/ Powered) Acquisition Cost Difference $ Acquisition Cost Difference % Sedan 2014 Ford Fusion S $21,900 2014 Ford Fusion Hybrid S $26,200 $4,300 19.63% SUV 2013 Tahoe LS 2WD $40,405 2013 Tahoe Hybrid 2WD $53,620 $13,215 32.71% Medium-Duty Truck 2013 Ford F-350 Super Duty XL 4WD $37,175 2013 Ford F-350 Super Duty XL 4WD w/ Propane Autogas Option $47,070 $9,895 26.62% Fleet managers must compare the initial acquisition costs between alternative-fuel vehicles and their conventionally fueled counterparts when making purchasing decisions. TABLE 5: AVERAGE COST: HYBRIDS VS. CONVENTIONALLY FUELED VEHICLES (AFTER FIVE YEARS AND 1,000 MILES) Cost of Ownership Adjusted Invoice Depreciation Fuel Consumption Hybrid Models $72,151 $45,185 $30,615 $14,424 Internal Combustion Engine Models $70,569 $39,900 $26,307 $19,021 $1,582 $5,285 $4,308 ($4,597) Differential Fleet managers may have a diffcult time justifying the purchase of hybrid feet vehicles when the average fve-year fuel savings do not compensate for the initial investment. with surveys and in-person interviews, feet operations can determine what activities within the organization need a vehicle and what type of vehicle is needed to perform specifc jobs (e.g., six-cylinder or four-cylinder, SUV or sedan, 4x2 or 4x4). Staf positions for which a permanently assigned vehicle or piece of equipment is no longer justifed are transitioned to using motor pool vehicles, rentals, personally-owned-vehicle (POV) reimbursement, public transportation, and shuttle or taxi services. To ensure that employees choose the most cost-efective mode of transportation, some organizations are implementing computerized solutions that select the mode with the best value based on an employee's travel plans. Evaluating PersonalUse Fringe Benefts Many corporate feet organizations charge drivers for the cost of personal use of a company-provided vehicle and most follow IRS annual lease value safe harbor guidelines to calculate the charge-back amount. When using the Annual Lease Value, fuel must be added separately. Te IRS allows the employer to either value the fuel at 5.5 cents per mile (cpm) or at the employer's actual cost. Many feet organizations continue to use the lower amount of 5.5 cpm when the typical cost of regular fuel for an intermediate car is about 12 cpm. Te variance of 6.5 cpm equates to $325 in lost reimbursement per vehicle when presuming 5,000 average annual personal miles (20,000 annual miles with 75 percent attributable to business use). For a feet of 1,000 vehicles, the savings add up to $325,000 per year. Using Fuel-Management Technology Fleet and fuel management technology is essential for any organization with a feet. Moreover, organizations that operate their own bulk fuel site should use a fuel management solution that validates vehicle and operator information and captures fuel transaction data. PHOTO: ©ISTOCKPHOTO.COM/BET_NOIRE 40 AUTOMOTIVE FLEET I NOVEMBER 2013 Fuel effciency can make a big difference when feet managers are looking to reduce fuel consumption, especially if they can perform the same job with a vehicle that boasts higher mpgs. Fleets that use commercial fuel sites should utilize a third-party fuel card provider that can validate and capture fuel transactions with level 3 or greater detail. Transactions captured by a commercial card provider and fuel management systems can be imported through an interface into an FMIS where they can be interrogated to make management decisions and analyze trends. Modern telematics solutions are also capable of capturing fueling events and forwarding the information on to an FMIS via an interface. Fuel transactions should be validated to identify bad data and improper use of an organization's resources. Most modern fuel management systems and commercial fuel card providers have the ability to validate driver, vehicle, and meter readings prior to authorizing a driver to fuel a vehicle. Tey also have the ability to limit the amount and type of fuel that can be dispensed and how many times a vehicle can be flled within a 24-hour period. Tese and other validation rules should be considered as part of any fuel management strategy. Tese are just a few strategies that can be used to cope with the rising, volatile fuel costs, and help control the overall cost and sustainability of a commercial feet. Tese concepts can be augmented with driver training, business policies, and other technologies that drive greater fuel economy through better driving habits and tighter fuel management practices. AF About the Author Brad Kelley is a senior vice president with Mercury Associates, Inc., a feet management consulting frm that works with feets of all types and sizes. He can be reached at bkelley@mercury-assoc.com.

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