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Reimbursement Analysis

The client’s fleet team decided to enlist ARI’s Strategic Consulting group to conduct a reimbursement analysis demonstrating the quantitative and qualitative comparisons of fleet versus reimbursement.

Fleet Background

Customer in the education industry with 700 vehicles, 60% of their fleet was comprised of Dodge Caravans and Ford Escapes used to carry samples and products.

 

Objective

The company was acquired in the fall of 2013. The new firm immediately wanted to cut costs across departments, including fleet. They wanted to eliminate vehicles under fleet management and move drivers to reimbursement. They viewed this as a major cost savings. They would reimburse their drivers $310/month, plus $0.27/km for fuel.

 

Approach

The client’s fleet team decided to enlist ARI’s Strategic Consulting group to conduct a reimbursement analysis demonstrating the quantitative and qualitative comparisons of fleet versus reimbursement. The client understood the impact of the qualitative items, but the new ownership was most concerned with cutting costs and was convinced moving to reimbursement was the best way to do so.

The fleet team understood the new ownership was open to new ideas. ARI performed site visits, engaged in discussions with drivers, and performed ride-alongs to understand how the vehicles were being used. Based on the assessment of the fleet, ARI determined the client no longer needed the cargo space they once had. The analysts proposed replacement all vehicles with Ford Fusions. Doing so would enable the client to negotiate a better volume discount with the OEM, incur lower annual maintenance costs, improve fuel economy, and realize gains on their current vehicle sale proceeds, taking advantage of a strong resale market. ARI also suggested a monthly driver contribution deduction.

Projected Savings/ Benefits and Results to Date

The analysis and recommendations identified $2,141,790 in total life cycle savings ($535,447 annual savings) for company provided Ford Fusions vs reimbursing drivers $310/month, plus $0.27/km for fuel. The client understood their fleet would be more efficiently run by a fleet management company then with a reimbursement program and they were extremely happy with the service ARI had provided over the years.

With the help and involvement of the client, ARI conducted an extensive analysis, exploring multiple options to determine the best cost savings source:

  • Closed-end leasing
  • Lease (with current models) vs reimbursement
  • Lease (with new vehicle model) vs reimbursement
  • A mix of closed-end and open end leasing

Our customer’s fleet team was able to demonstrate to the new ownership the best cost savings approach was not reimbursement, but rather to replace their current fleet with new models and continue with open-end leasing.

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