How to Hone in On Fleet Depreciation

A shift in the lending industry now requires car rental companies to produce more accurate fleet accounting through multiple reports. TSD explains how knowing the types of depreciation calculations will help you better prepare in securing a loan.

Photo: ©
Photo: ©

The most successful rental car operators know the importance of back-end management, particularly within their fleets. When TSD first began developing products for the car rental industry in 1983, many companies were thrilled simply to automate their counter operations. But from the beginning, TSD built controls that allowed car rental operators to take a more holistic view of their fleet and business through reporting.

As the business of car rental becomes increasingly complicated, TSD has responded by developing new tools to increase business visibility and controls. As the way car rental companies conduct business changes, we are often among the first to hear about it — courtesy of requests for feature updates and changes from our large and varied base of customers.

So when we began to hear that our customers needed more robust reporting on vehicle depreciation, we knew there was a shift happening within the lending industry that required car rental companies to dig deeper and produce more accurate fleet accounting.

New Demands by Lenders
We discovered many of our customers spent large chunks of valuable time in spreadsheets as they met their various lenders’ requirements for depreciation reporting. Their ability to effectively manage the back end became essential to getting financing and weathering a tough economy.

While many car rental companies struggle to get financing, those that are able to manage fleet values properly have a distinct advantage. “Banks are super sensitive about customers being underwater, so they’re taking a look at the strategies companies are using to depreciate their fleet,” says Neil Abrams, head of Abrams Consulting Group.

1st Source Bank Vice President Joe Opferman saw firsthand how important leveraging your fleet is in the current market. “Currently, the rental car organizations with the strongest balance sheets are being actively cultivated by lenders,” he says. “Lenders who had abandoned the market when the economic crisis hit are returning, but are focusing on the most financially strong companies.”

One significant change that many car rental operators face is the demand put on them by finance sources to track depreciation. While for decades car rental companies have calculated their fleet depreciation with a straight-line strategy, as available financing tightens, banks are requiring more detailed depreciation reports and a more accurate account of the fleets. The burden to prove their financial stability falls on the car rental company.

“Banks are requiring that we put 5-10% down on fleets, and they want to make sure there is enough money in collateral among the rest of the fleet,” says Tom Krug of Express Car & Truck Rental, a TSD customer who initially approached us for more robust depreciation reporting.

CONTINUED:  How to Hone in On Fleet Depreciation
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