Making effective vehicle remarketing choices is an important part of J.D. Schulte's responsibilities. As the fleet manager for the City of Moline, IL, he has at his disposal a variety of alternatives for disposing of used vehicles and equipment. The hard part, he notes, is to continually evaluate the choices by taking into account a number of factors, and to make decisions that result in realizing the highest possible resale value.
The city's fleet of about 380 vehicles and pieces of equipment is managed by Fleet Services, a division of the Public Works Dept. Fleet Services, which handles specifications, acquisitions, upfitting, maintenance, replacement schedules and disposal of assets, owns all units and leases them back to internal users. The operation also manages the city's vehicle replacement fund with the assistance of the city finance director.
LEVERAGING THE INTERNET
“We've used the Internet for most of our disposals since 2005,” Schulte explains. “Internet auctions have resulted in an increase of over 60% in disposal revenues. Bidding for a typical auction starts at the unit's depreciated value, and while some units have been sold for the minimum, most sales are significantly higher, even when taking into account auction fees and the cost of shipping and delivery.
“Online auctions also give us flexibility because they eliminate the need to sell all used vehicles and equipment at one time,” Schulte continues. “We're often selling specialized equipment so we build profiles on buyers and notify them when units they may be interested in are becoming available.”
In 2007, to help promote its available vehicles and equipment, and to answer typical questions from potential buyers ahead of time, Fleet Services began creating videos of the equipment and posting them online. For example, a video will demonstrate if the hydraulic system works properly, and include a walk-around of the unit to showcase specific features or defects.
“When we filled a support staff vacancy this past spring, we incorporated Internet auction skill requirements into the job description,” Schulte says. “We now have an in-house support staff person who is creating our vehicle and equipment remarketing videos and taking pictures of units and posting online auctions. Rather than using an outside provider for this service as we have in the past, handling auction development in-house is much more cost-effective. We're even assisting our police department in the disposal of forfeiture vehicles.
“We also started holding live auctions this year,” Schulte adds. “This format provides an auction setting with a virtual bidding option that attracts an even broader audience. We've seen some of the best sale proceeds on highly specialized utility units with special hydraulics from this program.”
ALWAYS ON MY MIND
Remarketing considerations for the City of Moline actually begin when the fleet is making initial decisions about replacement cycles. “We use lifecycle cost analysis for the majority of our purchasing decisions,” Schulte explains further. “When a vehicle is acquired, we establish an amortization schedule with an anticipated salvage value. We also anticipate how many years the unit will be in front-line service and put in a calculation for inflation. Financially, we try and prepare to fund the depreciation of a unit so we can purchase its replacement when it is no longer cost-effective to operate.
“Proper planning before a vehicle is purchased and the use of online auctions has increased resale revenues,” Schulte concludes. “Proceeds from the sale of used vehicles or equipment go into our fleet's replacement reserves. This means we have more funds available when we need them; more importantly, we're using fewer tax dollars to keep the fleet ready to provide services to our citizens.”