Purchasing a fleet of vehicles is not always a wise business investment.
If you are thinking of purchasing a fleet of vehicles, it may be a sign that your business is growing or you need a more efficient way to transport products or expand your market. Many car dealers offer discounts for fleet customers, which can make the purchase less of a drain on your budget. However, there are some potential disadvantages associated with buying a fleet to take under consideration.
Management
Depending on the size of your fleet, you may need to hire a fleet manager and support personnel to direct its operation, which creates an additional expense for your business. Your fleet manager will need to keep tabs of vehicle mileage, maintenance and handle all insurance-related matters like processing claims filed with the insurance company. He may also need to inspect the vehicles periodically to ensure employees do not abuse fleet vehicles, especially in situations where employees use the vehicles for personal as well as business purposes, as permitted.
Transfer of Expenses
If your business is moving from a situation where employees used their own vehicles for business purposes, such as salespeople using their personal vehicles to make sales calls, a fleet creates additional expenses for the company. Instead of the employees absorbing the expense of items such as insurance, registration and maintenance, the business must now cover these costs since it owns the vehicles. You will also need to weigh the projected fleet costs against what you had been paying employees in the form of mileage embarrassment or a car allowance if applicable.
Large Upfront Expense
If you are purchasing an entire fleet of vehicles at once instead of gradually phasing the vehicles in over time, it can create a large upfront of expense for your business, which limits your cash flow. If you operate a smaller business, this might seriously hinder your ability to earn a profit if implementing a fleet does not result in increased productivity, such as enhancing the ability to move materials and merchandise more efficiently.
Leasing Alternative
Purchasing a fleet of vehicles prohibits taking advantage of some of the possible benefits available to you from alternative vehicle acquisition methods such as leasing. With leasing, your monthly payments are normally lower than when purchasing, and the leasing company may absorb much of the maintenance expense. However, you might not have as much flexibility regarding the customization of your vehicles, and you may incur additional charges if the lease includes a per-mile fee for exceeding annual mileage limits.
