Motor pool rentals: The wheel deal

Keeping a motor pool for employees can be an effective way to provide transportation for government business. However, if they are not managed well, reserved vehicles can be a drain on the budget. To save money on motor pools and still deliver service to city and county employees, some fleet managers have turned to rental car agencies to supplement or even outsource their fleets.

Downsizing the fleet

Washington County, Ore., wanted to reduce the size of its motor pool to save money, but Fleet Manager David Switzer did not want to compromise the service he provided to county employees. Switzer began using a rental car agency last year to supplement the county’s 32 reserved vehicles. “We don’t have to size the pool to meet the peak demand,” Switzer says. “We saw it as an opportunity to make sure that we [could provide transportation for our employees] without buying $12,000 to $15,000 cars.”

Downsizing the motor pool was a necessity for the fleet services division of Kern County, Calif., when the county decentralized the division in 1995. Decentralization gave each county department the option of using the division to maintain its vehicles or taking care of them itself. To compete, Fleet Services Manager Larry Werts had to find ways to make the division’s services more appealing to county departments. “Overnight, we went from maintaining 1,200 vehicles to [maintaining] 300 and from 22 employees to eight,” Werts says. “We had to focus on our core business, which is repairing cars.”

In 1997, Werts cut the size of the motor pool in half and decided to use a rental agency to meet peak demand. Now, the division maintains 85 vehicles — including vans, sedans, pick-up trucks and four-wheel-drive trucks — for general county employee use. Even with that fleet, Werts estimates that county employees rent seven to 15 vehicles from the rental agency each day. “We wanted to get rid of the [motor] pool completely,” Werts says. “But the prices didn’t work out to do it.”

That was not the case in Montgomery County, Md., which has outsourced its entire motor pool to a rental car agency. Two years ago, the Division of Fleet Management maintained 63 vehicles for general county business travel, but it found that employees weren’t using them because they were old. (The pool consisted mainly of 1986 model compact cars, vans and trucks.) In addition to the lack of use the vehicles were getting, the division’s maintenance costs were rising.

The county issued a request for proposals to explore the possibility of using a rental car agency for the motor pool. “We thought it was unique at the time to [issue an RFP] for something like that,” says Maggie Orsini, administrative specialist for the Division of Fleet Management.

The division found an agency that could provide cars, trucks and vans, and employees have warmed up to the idea of using the agency instead of the county cars. “They like [the fact] that the cars are usually no more than two years old,” Orsini says.

Comparing the costs

Before deciding to eliminate all or part of a motor pool, fleet managers must compare the cost of having many reserved vehicles with the cost of renting vehicles from an agency. “You have to ask, ‘Could you provide the service at the same [cost] or less?’” says Tom Gannon, president of the California County Fleet Managers Association and fleet manager for Alameda County, Calif. “When you rent, you don’t have to pay for maintenance or wear and tear on the vehicles.”

The cost of the motor pool includes the purchase price of the vehicles as well as maintenance, depreciation and operating costs. In 2000, Heathrow, Fla.-based AAA estimated that, considering all those factors, the average cost of driving a car was nearly 50 cents a mile for a vehicle that would be owned four years and driven up to 60,000 miles.

Because the cost of owning vehicles is high, fleet managers want to use their vehicles as much as possible to get the most value out of them. “We want to get at least $3,500 to $5,000 worth of use per year out of each of our motor pool vehicles,” says Milton Reid, vice president of the Iselin, N.J.-based National Association of Fleet Administrators and fleet management director for Gainesville, Fla. “It might be better to rent if you’re not getting your money’s worth.”

Some fleet managers have decided to rent vehicles only for long-distance trips because maintaining cars for that purpose is too costly. Redding, Calif., for example, began using a rental car agency in 1995 to save money on cars that were reserved for long-distance trips. The existing fleet was old, and the maintenance costs were rising. When the county began renting from an agency, Fleet Manager Les Lacy was able to reduce the motor pool by six cars.

“If I purchase a car, I have to figure in the cost of replacing that car after 10 years or 100,000 miles or when the maintenance costs rise to the amount of the purchase,” Lacy says. “When I rent, I don’t have to worry about that. The agencies usually get rid of their cars at 30,000 miles.”

Jim LeRoy, fleet services manager for Stanislaus County, Calif., also found that it was less expensive for employees to use rental cars on long trips than to use county-owned cars. On a county-owned car, the Fleet Services Division charges 34 cents per mile. LeRoy compared that with the $34 per day and unlimited mileage from a rental agency. For trips longer than 100 miles, it made sense to use a rental car. “If someone is going to Sacramento, which is 150 miles one way, I save $15 to $20 [each way] using a rental car,” he says.

Stanislaus County employees now use the rental cars about 40 to 50 times per month, and the Fleet Services Division has been able to auction off or distribute 10 vehicles to other departments. “If I buy a new car and it sits, I lose money,” LeRoy says. “Now the cars aren’t sitting.”

Paying the bills

In addition to cost, fleet managers should consider the billing procedures involved in renting cars for multiple departments. Some fleet managers prefer to arrange vehicle use and to have bills sent to a central department; others prefer that each department arrange its own vehicles and billing.

Montgomery County rents all of its motor pool vehicles from a private agency, and the Division of Fleet Management receives a monthly bill from the rental agency. The division then re-bills the departments for their vehicle use. Because the division is self-supporting, it charges a 5 percent administrative fee to the departments. “Billing has been our biggest problem because it is time consuming to look through the bills to find who used what,” Orsini says.

The Fleet Services Division of Kern County has avoided re-billing by assigning purchase order and account numbers to each department that uses the rental cars. “We didn’t want to be a clearing house for the bills,” Werts says. “If [the departments] don’t pay, the company doesn’t come to me. We want customers to be responsible for what they use.”

Stanislaus County, which modeled its contract after Kern County’s, also has arranged for each department to be billed individually by the rental company. Each department has a contact person who schedules the vehicles and uses a county credit card to pay for them. “We set it up that way from the beginning,” LeRoy says. “The system saves everyone time.”

Many fleet managers have found that using rental car agencies to supplement or replace their motor pools has allowed them to save money and eliminate unneeded vehicles. “One of our guiding principles is to [outsource] if we can’t [provide services] efficiently in-house,” Switzer says. “We wanted to make our overall operations efficient, and renting cars has helped by handling our overflow demand.”

For more information on fleet management issues and for links to industry resources, visit the Web sites for the National Association of Fleet Administrators (www.nafa.org ) and the California County Fleet Managers Association (www.ccfma.org ).