Fleet sales and leasing can potentially boost a dealership's sales, and dealers who are in it are in it big. But many dealers steer clear.
The deciding factor seems to be whether the dealership is set up to handle these large accounts and has the necessary number of people and other resources to make it profitable.
It's hard for a local dealership to manage fleet sales, which are often national in nature. What seems to work is to have a special department for fleet sales.
From the automakers' side, fleet sales and leasing can prop up sales of under-performing models or help win sales crowns. Some dealerships generate huge sales in fleet units while others avoid them like a factory audit.
There seems to be very little middle ground in the fleet leasing business. Either dealerships generate much business through fleet sales or it's very minimal.
"Dealerships rarely dabble in fleet sales - they either do it all the way or not at all," says Jim Kupczyk, fleet manager for the Russ Darrow Group based in Waukesha, WI.
Although Mr. Kupczyk is a recent addition to the Russ Darrow Group, he has spent 16 years in fleet leasing. "It's its own monster. You can't just do it part-time," he says.
Mr. Kupczyk says generating revenue through fleet sales enables the dealership to devote the resources necessary to maintain a fleet department. He says his dealership emphasizes fleet sales for many many reasons.
"Obviously there is the exposure. Fleet sales generate a profit for the dealership and they help dealership numbers when it comes to allocation," he explains.
Then there are the benefits that come into play after the vehicles have been leased to a company. "You've got the service work, the body shop work, the routine maintenance work and recommendations. The benefits go on and on," Mr. Kupczyk says.
Usually, he says, if a customer drives a company vehicle that was leased from a Russ Darrow dealership and that customer has a good experience with both the vehicle and the dealership service, he or she is more likely to come back to buy a new personal vehicle.
"There are plenty of residuals, and potential private car sales is one of them," he says. "We have a number of return customers."
Mr. Kupczyk says fleet leasing definitely is profitable for both the the dealership and the fleet customer. The fleet customer can qualify for incentives from the manufacturer, such as price concessions.
Mr. Kupczyk adds that despite rumors, all fleet sales have to go through a dealership. He says he doesn't know of any instance where fleet sales can be obtained from the manufacturer. Most dealerships have franchise agreements with the car companies that prohibit the manufacturers from taking business away from the dealership - fleet sales included.
Despite his belief that fleet sales are an integral part of dealership life, Mr. Kupczyk says he realizes that many dealerships just can't handle the commitment and resources it takes to devote to a fleet department.
"Fleet is a high-speed, intense department. You have to know your product, know your customers; you have to have the manpower to do it properly."
Many dealers say they'd love to do more business in fleet sales, but most who don't say it boils down to money and resources.
Bill Collins, general manager of Don Massey Cadillac, says he just can't afford to devote much time or space to fleet sales at the Plymouth, MI dealership. He says vehicle storage space is at a premium.
He explains, "We have a lot of inventory. We keep $15 million worth of new cars on the lot and $2.6 million in used cars. I just don't have enough room for fleet cars."
But he whimsically adds that if he suddenly acquired more lot space and more employees he might consider beefing up his fleet inventory.
Maintaining and servicing the vehicles takes quite an investment both in money and in man-hours, which Mr. Collins says he just doesn't have.
"The cost to pay a preparation manager to prep the fleet cars just isn't that lucrative for us. It might be lucrative for others but not us," he says.
He estimates he'd need an additional 35 employees to handle fleet sales. Those employees would be responsible for more than just securing and maintaining fleet accounts. Fleet sales require as much, if not more, attention than regular new vehicle sales.
"It's just not worth it to me," says Mr. Collins.
He adds that he does do some fleet business. He has a relationship with Enterprise Rent-A-Car and moves about 140 vehicles annually for them.
"We do some, but it's minimal. We just sell too many new cars," he says, citing new-car sales at about 2,500 units a year.
Peter Deiser, fleet manager at Braman Honda of Palm Beach, FL, says that dealership also does little fleet business, about 20-30 leased vehicles monthly.
Partly, that's because there's no one corporate office handling fleet leasing. "It's pretty much done independently at each of the dealerships," he says.
Braman Honda is looking to the Internet to generate more fleet customers, but Mr. Deiser says the store just isn't set up to handle millions of dollars a year in fleet business.
But they wouldn't turn new customers away.
"We're always looking to prospect new fleet sources," he says, adding that he wouldn't mind if new resources to handle more fleet sales suddenly came his way.
Mr. Kupczyk says that fleet leasing also can make the dealership look good come allocation time. Fleet vehicles are counted just like non-fleet vehicles when it comes time to report sales figures back to the manufacturers.
At times, lower selling models are specifically used for fleet sales, which makes a dealership look good because it is able to move inventory that other dealerships aren't.
Dealerships can be rewarded for moving less popular models. And sometimes it works out that fleet leasing is the best way to move those models out of dealership lots.
Says Mr. Kupczyk, "We love to do that. Sometimes what's hot in retail is hot in fleet, but sometimes it doesn't work out that nicely. Dealers are very happy with fleet departments when you are selling the models that aren't really hot. The manufacturers really like it. When the next allocation time comes, maybe you'll get more of the models that are hot."