Turning A Profit

At the 2011 Car Rental Show, four members of the Tennant Group Roundtable each presented a proven cost-reduction and profit-making idea that they have implemented in their car rental operations. Seminar attendees voted for the best idea. Can they work for you?

Here are four ideas you can use today to drive profits to your bottom line.

1. Base fleet purchases primarily on projected holding costs.

Mike Kulp

Kulp Car Rentals, Gilbertsville, Penn.

Kulp Car Rentals has instituted a policy of making all fleet purchases based primarily on projected holding costs of the vehicle. Our goal is to depreciate the rental fleet at the rate of one percent per month, and still sell the vehicles at a gain. In 2010 the actual monthly cost of depreciation on the 341 fleet vehicles we sold was .87 percent.

Before a vehicle is purchased for the fleet, we determine that vehicle's MMR (Manheim Market Report) value for one-, two- and three-year-old models. This is used to determine the estimated residual value of the vehicle. Based upon the current acquisition cost and estimated residual value, we will purchase the vehicle if it meets our 5-percent per-month budget.

In order to maintain this depreciation rate, we purchase based upon vehicle availability and market conditions. In Nov. and Dec. 2010 and Jan. 2011 we bought more than 200 vehicles because the cars were available at the right price, not because we thought we needed that many for rental.

Since the summer of 2008, we have also sold off all of our larger SUVs and bought only fuel-efficient fleet vehicles. We believe that gas prices will again climb to rates that will significantly impact the value of larger, less fuel-efficient vehicles. Although we could have rented these vehicles at a higher rate than our current fleet vehicles, we did not purchase them because of our estimate of their residual value.

In summary, the driving factor in fleet purchase decisions is not the vehicle's rental rate, or the type of vehicle to rent-it is whether the acquisition cost will allow us to keep the depreciation cost within our budget.

2. Get "free" money for training.

Jack Vercollone

Verc Car Rental, Southeastern Mass.

For the last 10 years, we have received more than $100,000 in training from three separate grants from our state's (Massachusetts) Workforce Training Fund. The training was for selling extras, computer training, supervision techniques, customer service and operations management.

Grant funds were matched, dollar for dollar, with company money, either cash or in kind.

Our match was met by paying employees while they trained. The company chose a different trainer for each type of training.

Training can be spread over two years, minimizing disruptions during busy season. The Training Fund comes from every company's unemployment tax contribution. If you are going to have to pay it, you might as well get something back!

Most states have the same or similar training grants available.

CONTINUED:  Turning A Profit
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