Outlooks and Insights - Element Fleet

GE Capital
Fleet Services

Outlooks
and Insights

Strategy tool for your fleet

improve vehicle selection
control costs

improve environmental performance
manage maintenance costs
optimize repair rates
reduce accidents
increase compliance
mitigate corporate risk

optimize fleet cycling parameters
reduce fleet administration
enhance driver satisfaction
maximize resale values

optimize vehicle productivity

outlooks

You are challenged to manage your fleet to be as cost effective,
productive and environmentally responsible as possible — no easy
task in today’s marketplace. But the more you can anticipate what
tomorrow will bring — and apply those outlooks to your fleet today —
the more successful you will be.
We’ve tapped our industry experts to identify the key trends shaping
fleet management’s future. Then we asked them to turn those outlooks
into insights that can directly benefit your fleet today and in the future.
The result is this strategy tool. We hope you find it valuable in helping
drive even more value for you and your fleet.

outlooks

financing and planning

Current economic conditions such as This economic environment makes
instability in financial markets, slow GDP vehicle selection decisions in the
growth, inflation, changing interest rates coming year increasingly critical. Many
and volatile fuel costs have created companies are considering a shift to
several key implications for businesses: smaller or hybrid vehicles in order to
lower their operating costs. However,
• Companies will have less cash these decisions require careful
from operations over the next consideration and analysis to ensure
couple of years the vehicle will still meet its intended
business use as well as minimize
• Financing sources may have upfront and ongoing operating costs.
liquidity issues

• Companies may need to
diversify lenders

• Financial instruments will play
an increasing role in improving
financial ratios

30,000 $25,500 15,000
25,000
$24,000 $23,400 12,000
Total life cycle costs ($) 9,000
20,000 Annual vehicle cost ($) $10,496
$9,172

15,000 $0.34 $0.32 6,000 $1,324
10,000 per mile per mile 3,000 savings
per year
5,000 $0.31
per mile

0 6-cylinder hybrid 4-cylinder 0 employee lease
reimbursement

Lifecycle cost comparison by vehicle Lease verses reimbursement per
type. Source: GE Capital Fleet Services year. Source: GE Capital Fleet Services

insights

reduce fleet administration
enhance driver satisfaction
improve vehicle selection

Simplify your fleet We also evaluate whether it will be
administration to save costs comfortable and safe for transporting
passengers, if needed. Are there
In a volatile economic environment, weather or driving considerations
some companies use reimbursement that may create issues with vehicle
as a way to avoid the administration performance and acceleration? Does
of managing a fleet. However, the vehicle reflect (even enhance) your
reimbursement programs pose many company image? Are there implications
potential issues including increased to driver retention and morale by
liability and complexity to manage. downsizing from the current vehicle
What’s more, as fuel prices, offered? What does your competition
maintenance costs and insurance offer their drivers? If drivers have a
fees continue to escalate, this fleet negative perception of a smaller vehicle,
model can lead to a financial burden consider offering additional options
for the employee if the reimbursement to make the vehicle more attractive
doesn’t cover actual expenses. to them.

GE makes it easy to satisfy your As a GE customer, you can get help
drivers while reducing costs and navigating all these considerations.
increasing control. From vehicle We pair your requirements with our
acquisition to disposition, our open- vehicle experts to choose and
end lease and vehicle management configure the right vehicles and
services meet the needs of you and upfitting for your needs. This includes:
your drivers. The open-end Terminal
Rental Adjustment Clause (TRAC) lease • Offering flexible ordering methods —
provides the benefits of ownership driver or manager initiated, individual
while providing additional lease and or bulk orders
tax benefits coupled with fleet
management expertise. • Providing end-to-end management of
the vehicle selection, acquisition and
Consider smaller or hybrid vehicles delivery process

As you evaluate your vehicle needs and • Consolidating your vendor payments
options, we work with you to ensure
the vehicle can meet your needs: Can • Providing expertise and services for
it withstand the necessary upfit? Are all vehicle types including cars, trucks
there issues with cargo capacity? (class 1–8) and trailers
Can it support the typical load weight?

outlooks

compliance support

Personal use of company-provided Non-compliance carries heavy costs
vehicles is surprisingly common. In fact, to the employee and employer.
most commercial fleets allow it. These include:
However, personal use increases fleet
costs by shortening a vehicle’s service • IRS penalties and interest
life. And that’s not the only downside.
• Unfavorable publicity
According to the tax law, employee use
of an employer-provided vehicle for the • Damaged relationships
employee’s own use is a fringe benefit
to the employee — a benefit that is What’s more, IRS audits open a business
taxable. It is up to the employee to up to discovery. A full audit can be
substantiate and document personal use initiated by a simple reporting gap at
of that vehicle. This poses a challenge: the employee level.
How can you improve employee
compliance to minimize corporate risk? These tax laws are expected to remain
the standard for the foreseeable future.

91% 57% EMPLOYEE AND SPOUSE USAGE EMPLOYEE ONLY W-2 penalty $ 100

allow Fed. income tax (28%) 1,708
personal
State income tax (7%) 427
use
FICA (15.3%) 933
43%
Unpaid tax interest 500
9%
Penalty (5%) 1,600
mandate
company Total $5,268
use only
LIMITED Assuming typical annual
Percentage of companies that permit lease value of $6,100.
personal use of corporate vehicles.
Source: 2008 Personal Use survey Example: Total non-compliance cost
conducted by Automotive Fleet magazine per vehicle. Source: GE Capital Fleet

Services

insights

increase compliance
reduce administrative costs
save time and effort

Make it easy for drivers As a GE Personal Mileage/Taxable
to provide their mileage Benefit Program customer, you can be
confident that you will be in compliance — 
Give drivers a way of consistently even if an employee misses a report.
recording their mileage. Key information The program issues reminder emails
to track includes date, start/end odometer, and, if the driver doesn’t respond, assigns
start/end location and purpose. Many full, personal-use value. This helps
companies provide mileage logs as ensure your company always stays
part of a holiday gift at year-end. within tax guidelines.

As a GE Personal Mileage/Taxable Save driver and administrative
Benefit Program customer, you can time and effort
give your drivers 24-hour access to
Internet and phone-based reporting.* The more you make mileage reporting
This convenient service lets your drivers a part of your drivers’ regular routine,
quickly and easily provide the mileage the less time it will take them to comply.
information without completing any This also saves you time answering
paperwork. Drivers may also view questions and addressing reporting
their current and previous tax year gaps. IRS regulations provide guidelines
reports online. to create an effective mileage reporting
system. Model your driver policy on
You and your drivers can use GE’s Web- those guidelines and consult with your
based tools to access reports and tax, legal and payroll departments to
provide updates as needed. You can confirm that your practices meet their
track overall personal-use percentages legal, human resources and payroll
and audit non-compliance as well as needs as well.
review and update driver assignments.
As a GE Personal Mileage/Taxable
Improve compliance Benefit Program customer, you can
minimize the time you and your drivers
Make sure drivers know that compliance spend dealing with compliance. The GE
is a business-wide objective. There is service automatically calculates each
simply no excuse for non-compliance. driver’s taxable benefit. This includes
Emphasize the risks to them and to managing multiple vehicles per driver,
the company for not reporting their if needed. GE then provides quarterly
personal mileage. updates to drivers and gives you annual
reports for payroll and W-2/T4 statements.
* Phone access is in English only.

outlooks

fuel costs

Growing global demand. Political There will be continued pressure on
uncertainty in exporting nations. fuel prices requiring your continued
Refineries running 24/7 with a efforts to control costs, influence
high impact from breakdowns and driver behavior and reduce fuel
shutdowns. Environmental issues consumption. Also, as nations,
precluding new U.S. refineries. You organizations and individuals seek
don’t have to be an energy expert to reduce their carbon footprint, you
to know that fuel prices will continue will be challenged to improve your
to be volatile. fleet’s environmental performance.

Fuel Prices

2008 2009 2010 diesel
unleaded
$7.00 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
$6.00
$5.00
$4.00
$3.00
$2.00
$1.00
$0.00

Q1 Q2 Q3 Q4

Diesel and unleaded fuel prices will continue to be volatile.
Source: U.S. Department of Energy actuals and forecast as of 2/10/10

Minimize fraud and misuse raising the per-month fee to the driver
As the price of fuel goes up, so does to cover increasing fuel expense.
the temptation to use the fuel card to
fill personal vehicles or to use vehicles As a GE Fuel Management Program
for personal tasks. It’s important to
monitor mileage, review odometer customer, you can get the data you
inputs and update velocity controls.
Too many fill-ups in a day, purchase need to help drivers understand the
amounts that exceed limits and
excessive mileage could indicate fraud. Telematics effects of speeding and
long idling periods, the
As a GE Fuel Management Program
customer, you can identify potential cost of sitting in stop-and-go traffic,
fraud and misuse via the daily fuel
exception report (go to my.Reports, the importance of route planning and
my.DashboardSM). The report allows
you to compare gallons purchased adherence to prescribed territories
with tank capacity and identify
transactions that exceed limits for and the environmental impact of using
parameters such as: spend per day,
number of daily transactions and fuel more efficiently. A guide to environ-
number of daily gallons.
mentally efficient driving is available on
Clarify your expectations
gefleet.com with information about
Remind drivers about ways they can
help control the fuel budget. Poor driving how your drivers can reduce fuel costs
habits, speeding and excessive idling all
add up to fuel inefficiency. Also consider and carbon emissions.
curtailing personal use of the vehicle or
Better
Up to 27% better fleet utilization Fleet
with Telematics. Source: GE Capital Utilization
Fleet Services
+27%

fuel costs continued

Improve selection and maintenance As a GE Fuel Management Program

Vehicle selection — including choosing customer, you can access the U.S.
the right size vehicle for the job — and
maintenance are key ways to control fuel price mapping tool on gefleet.com
fuel costs and improve environmental
performance by using fuel more efficiently. to identify stations with the lowest fuel
See the Maintenance Planning section
in this tool kit for other ideas to reduce prices in your area. You can also
consumption.
monitor your fuel performance and
Use low-cost fuel locators
carbon emissions via my.Dashboard.SM
Fuel prices can vary by gas station
within the same zip code during just Telematics If you add telematics,
one day. A few cents per gallon can you can reduce fuel
add up over the course of a year.
consumption dramatically each year.

CO2 reduction (metric tons) Savings (cost of fuel)

service -8 $552.50

delivery -11 $750

sales -3 $300

Ausvienrgagteeleamnnautiaclsf.lSeoeut racned: GCEOC2 arepdituacl tFiloenetnpoSremerrvviecheiscle with gas at $2.50 per gallon

insights

reduce consumption
control costs
improve environmental performance

Minimize premium fuel spend As a GE Fuel Management Program
customer, you can identify non-fuel
Few vehicles require premium fuel in purchases in my.Reports (go to my.
order to perform at their peak. These Dashboard,SM exceptions). Worth
fuels often just add cost — as high as noting: Coffee is not something you
25 cents a gallon. Instruct drivers to want on the fuel budget, but wiper
forgo the premium. You could save fluid, a quart of oil, coolant or a car
as much as one percent of your overall wash may be perfectly appropriate.
fuel spend. GE was the first fleet management
company to offer product-type
As a GE Fuel Management Program controls. These enable you to prohibit
customer, you can quickly review your snacks and coffee charges, yet allow
premium spend amount in my.reports specific automotive purchases. This saves
(go to my.Dashboard,SM exceptions). money and saves the driver from making
extra stops during a busy workday.
Monitor non-fuel purchases
33% 36%
When drivers put coffee and other
purchases on their fuel card those
hidden costs quickly add up — again,
as much as one percent of your
overall fuel spend. Monitor the costs
and stop drivers from continuing the
habits that put your budget at risk.

22%

2007 2008 2009

Fuel for business vehicle fleet operations now represents 36% of total costs,
up from 22% and 33% in 2007 and 2008. Source: GE Capital Fleet Services

outlooks

maintenance planning

As parts and labor prices continue to In addition, OEMs are tightening
increase, overall maintenance costs their scheduled maintenance
are on a parallel rise as well. That requirements, further increasing
means no foreseeable relief today or the overall cost of keeping fleet
in the future. vehicles performing efficiently
and effectively. These factors may
Specifically, in the coming year: compel you to find measurable,
manageable ways to offset the
• Service repairs are projected cost increases.
to rise 4–5%

• Tire prices are estimated to
increase 5–6%

4–5% 2010
increase 2009
5–6%
increase

2009 2010

Service repairs are projected to rise Tire prices to increase 6–8%.
4–5%. So2u00rc9e: GE Capit2a0l1F0leet Services Source: Major tire manufacturers

insights

manage maintenance costs
optimize repair rates
select the right vehicles

Create best-practice policies Negotiate optimal repair rates

Vehicle selection and lifecycle To effectively offset maintenance cost
replacement policies are critical increases, it is critical that each repair
predictors of maintenance costs. negotiation is optimized to your favor.

Extending auto/light truck vehicle life As a GE Maintenance Management
will cost an additional $12–$15 per Program customer, you can take
month for every 10,000 miles. That’s advantage of the GE-managed repair
$15,000+ per year for a 100-unit fleet, supplier network, which provides
not counting the additional driver reliable oversight needed to optimize
downtime and the overall diminishing each negotiation. In fact, the GE auto/
of the vehicle’s image — a reflection on light truck maintenance program can
your company’s brand. drive $300 per vehicle annual savings.

Regularly scheduled maintenance is Choose the right vehicle for the job
also proven to reduce fuel consumption.
You can save operating costs by
As a GE Maintenance Management carefully considering the size and type
Program customer, you can rely on GE of vehicle each driver needs based
to help you hone your policies and on their responsibilities. Under or over
accurately project your maintenance specifying a vehicle can significantly
costs. impact maintenance and fuel costs.

As a GE Maintenance Management
Program customer, you can rely on
our technical expertise to help you
select the right vehicle.

outlooks

driver safety

In fleet terms, safety is all about Most common preventable collisions
reducing the number of accidents
and reducing your corporate risk. On • Rear End Vehicle (24%)
average, 20 percent of the vehicles in
a fleet have accidents annually and 33 • Hit Stationary Object (22%)
percent of those are preventable. These
statistics are expected to hold steady. • Hit Parked Vehicle (17%)

Accident prevention solutions are • Intersectional (8%)
proven effective in reducing accident
costs and corporate risks. These include Driver distraction is the leading reason
accurately identifying driver risks, for these preventable collisions. Cell
influencing drivers to make safe driving phone use leads as the most common
decisions and providing effective distraction, but texting while driving is
vehicle maintenance. gaining fast.

Preventable

0 20 40 60 80 100
percentage of accidents within a fleet

On average, 20% of the vehicles in a fleet have accidents annually and 33%
of those are preventable each year. Source: GE Capital Fleet Services

insights

reduce accidents
mitigate corporate risk
minimize insurance rates

Identifying driver risks Influence drivers to make
safe driving decisions
The more you know about your drivers,
the more you can reduce accidents Well-trained drivers are safe drivers.
and mitigate corporate risk. Accessing They are also cheaper to insure. Be
motor vehicle records and other reports certain your drivers have opportunities
helps you anticipate and address driver to refresh their training — particularly
issues before they become situations. if they pose a higher risk based on
previous accident history.
As a GE Safety Program customer,
you can get complete details about As a GE Safety Program customer,
each driver, including motor vehicle you can go online to view your drivers’
records disclosing suspended licenses
and violations. You can also access individual risk levels from accident
GE’s best-practice knowledge to
address any corporate policy concerns. claim history to motor vehicle record

Telematics results. Using telematics,
you can also identify

training opportunities to reduce driver

risk. GE also provides Driver Safety

Training lessons. This is proven effective

at increasing driver awareness and may

reduce insurance rates.

National annual average accident repair increase 38% less than national average
GE annual average accident repair increase

As a result of GE’s cost management, our accident repair costs have increased only
4.7% over the past four years. The industry repair costs continue to climb, but as a
result of our safety programs, GE’s annual accident repair increase is actually 38%
lower than the national average. Source: GE Capital Fleet Services and CCC Pathways

outlooks

resale values

U.S. residual values for cars and light Credit crunch Many consumers could
trucks rose sharply in 2009, with prices not get credit to buy a new car, and
returning to pre-2008 levels. In 2008, therefore purchased less expensive
Manheim Consulting reported the worst used vehicles.
decline in residual prices in 15 years. That
trend reversed in 2009. Typically, a car Cash for Clunkers While this new car
or light truck will lose approximately 20 stimulus plan did have a temporary
percent of its value during a calendar effect on used vehicle demand, it was
year. In 2009, same-vehicle prices not enough to overcome the lack of
depreciated by less than one percent. used car inventory, and therefore did
Medium truck prices recovered somewhat not significantly depress prices.
in 2009, but gains were less dramatic
than those of cars, pickups and SUVs. While used vehicle inventories are
expected to rebound somewhat in
There were several reasons for the 2010, they may not reach pre-2008
residual price recovery, including: levels for several years. Residual values
appear to have returned to more
Low inventories With new car sales still typical trends after two years
lagging, dealers struggled to fill used car of volatility.
lots with enough vehicles to meet
consumer demand.

Units for all reporting model yearsCar & Truck Used Vehicle Price Index (SA)
adjusted to 15K mi/yr
110
105 100 = Average year 2000 prices ’09

100

95

90

85

80
’96 ’97 ’98 ’99 ’00 ’01 ’02 ’03 ’04 ’05 ’06 ’07 ’08

December

Seasonally adjusted index of average sale prices, using 2000 as a baseline.

insights

maximize resale values
optimize fleet cycling parameters
minimize aging fleet costs

Cycle vehicles strategically consistently deliver an additional $300
per vehicle on average against our
As vehicles age, maintenance costs peer group.
increase with additional preventive
maintenance and post-warranty Choose smaller vehicles
repairs. Lengthening the replacement
cycle also increases the one-time cost Small cars and crossover utility vehicles
to resume new vehicle purchases as (CUVs) are the only vehicle categories
the number of vehicles needing to be forecasted for increased demand through
replaced grows. Maintaining a steady 2014. If your business use permits,
replacement cycle allows you to take integrate more small cars and CUVs into
advantage of improved residual sale your fleet to see a greater resale return.
prices while also managing the cost
of aging vehicles. As a GE Remarketing Program
customer, you can get help navigating
As a GE Remarketing Program all the considerations of which vehicles to
customer, you can realize a premium use. We pair your requirements with
resale price over other remarketing our vehicle experts to choose and
efforts. GE’s multi-channel remarketing configure the right vehicles and upfitting
strategy focuses on personal and expert that best serve your needs today and
representation, strategic reconditioning, at resale time.
and MEGA sales and promotions

0 ’94 ‘95 ’96 ’97 ’98 ’99 ’00 ’01 ’02 ’03 ’04 ’05 ’06 ’07 ’08 ’09
5 0.6

Loss of vehicle value (percent (%)) 10 13 14

15 16
19 19 21 20 21 19
20 22 25 23 21
23
25

30 On average, a vehicle loses 20% of its value each year. The 36
35 recovery in resale values allowed prices to remain steady in
40 2009, with vehicles depreciating less than 1%.

Think Lifecycle Make your forecasts with the confidence
that comes from having actionable
As you plan your budget, consider the information about every aspect of your
fleet lifecycle — from financing through fleet. Operational metrics. Environmental
remarketing. This is the best way to performance indicators. Telematics-
understand your critical fleet challenges generated alerts. Best-practice insights.
and identify opportunities to improve At GE, we give you answers, not data.
productivity and reduce costs.

strategic
business
planning

fleet
lifecycle

vehicle & workforce

maintenance accidents
fuel driver records
license renewal personal use
driver safety labor
environmental mobile
performance management

Contact us today
If you have any questions about any
of the outlooks or insights provided in
this tool kit, please call your GE Capital
Fleet Services account manager today,
or contact us at gefleet.com

insights

Your next steps to success

Even with all the challenges ahead, it’s important to recognize that
there are also many opportunities to get more out of your fleet
investment, improve your cash flow, reduce costs, reduce your fleet’s
impact on the environment and gain more control. You can count on
GE to provide the information, analysis and ideas that help you reach
your objectives, in the short term and long.

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