When I was first introduced to the fleet market a little over 20 years ago, I was instantly amazed at the complexity of the industry. There were so many moving parts and so many decisions to make on a daily basis that it shocked me that fleet managers were able to stay on top of things. One thing, though, was usually pretty settled at most large fleets, they either bought or leased their vehicles, rarely was there a mix, and the concept of driver reimbursement was just a little speck on the horizon.
The buy vs. lease decision was usually clung to with an almost religious fervor with many companies, proclaiming either: “We own our assets!” or “Why would we ever want to tie up so much capital in something that isn’t our core business!” Fast forward to today and a lot of those moving parts that made the job so complex have been outsourced to make the day-to-day life of the fleet manager a little more bearable. But the old lease vs. buy decision is a lot more nuanced.
And reimbursement is a real thing now. So much so that Wheels Inc., a company that almost invented fleet management, has jumped into the fray and created its own reimbursement management program. And the majority of fleets today buy and lease. For the first time in the modern era of fleet management we have more readers of AF that own and lease vs. those that only own vehicles or only lease vehicles.
Reimbursement is often thought of as the big bad wolf of fleet management. First we had total fleet management, which was seen as a threat to the fleet function. Then we saw reimbursement as the natural progression for the company that was looking to get rid of that pesky fleet department. And there are a lot of good reasons why companies should consider owning or leasing vs. going with reimbursement.
As a matter of fact, AF Editor Mike Antich wrote an incredible article outlining 30 reasons why reimbursement might not be a good idea (see “30 Reasons to Avoid Driver Reimbursement”). But there are also some very legitimate reasons why a company should consider reimbursement for some parts of the fleet. It’s worth a discussion with your risk management department, your finance department, and with your fleet management company (FMC) if you use one.
There’s no goldilocks solution for running a modern fleet. For most decentralized, diverse, and evolving fleets, it’s unlikely that one buy vs. lease vs. reimbursement decision will work for every vehicle. It’s hard to imagine a scenario where Xerox is going to use reimbursement for its service fleet. Same for GE Medical Systems, or Frito Lay, or any of the other fleets that use complicated and highly upfit vehicles to service their customers. But it’s not so hard to imagine that companies faced with never-ending financial pressure might decide that some parts of the fleet are expendable.
The best fleet managers survived the total fleet management era because they brought value to their companies. They didn’t survive by ignoring the potential efficiencies to be gained from outsourcing, they learned to embrace the change and they educated themselves on how to take advantage of the new opportunities. Reimbursement will probably be seen in the same light some years down the road. Instead of being treated as the new big bad wolf come to eliminate the fleet (and the fleet manager’s job), it may come to be seen as a useful tool that every fleet manager should have in their toolbox
Originally posted on Automotive Fleet