In looking at a vehicle rental operation with the goal of improving profitability, improving utilization is almost always near the top of the list of things to focus on.
However, improving utilization is usually easier said than done.
We choose and train customer service agents who like people and like to make customers happy. A rental agent with good customer service instincts will want to have the correct vehicle cleaned and ready for each reservation and, if possible, other vehicles available in case the customer wants to upgrade or decides that the vehicle reserved is not exactly what is needed.
However, the rate structure in the always competitive vehicle rental industry requires most vehicle rental operations to run high utilization to be profitable. This is why a successful rental operator must foster a culture of high utilization. Employees must be trained to think that running out of cars is good, not bad.
High utilization is impossible without a good fleet plan, which provides the right number and right mix of vehicles throughout the year. Fleet planning is one of the most important aspects of a successful car rental business, and could be the subject of a series of articles or even a book. We will talk about fleet planning techniques that help decide the correct number of vehicles. Fleet mix, manufacturers, risk versus program, and other aspects of a good fleet plan will not be discussed here.
Calculate Your Optimal Fleet Size
Predicting the future is never easy, and as we have seen recently, sometimes impossible. The best place to start looking into the future is to look at the past or, in this case, your history of renting vehicles. You should have a record of the number of vehicles on rent, ideally by day, but at least have monthly averages. If this history goes back two years or more you can look at year-over-year changes and seasonal factors, though even one year’s history is useful.
Though this is changing with the new economy, the industry historically tended to be over-fleeted. This is partly because we often measure ourselves by fleet size and partly because the manufacturers used to make it very tempting and easy to add fleet. Those days are probably gone, but it is still a very useful exercise to look at what size fleet we should have had in the recent past.
If you only have monthly average on-rent data available, divide each month’s average on rent by 0.85. This gives you a simplistic view of the fleet size you would have needed to achieve 85 percent utilization. If you have daily numbers, write down the highest number of vehicles on rent each month. Add 2 percent for vehicles in service. This gives you the number of vehicles you would have needed to never lose a rental by being out of vehicles. However, this is not the correct size fleet, because no operation can afford to never be out of cars. Calculate the average on rent for each month and you will see that the fleet size we just arrived at does not yield good utilization.