Working out profit per vehicle in a rental fleet

The profitability of a rental fleet is not something you read off the overall profit and loss account: it is calculated vehicle by vehicle, by comparing the net revenue a car earns per day it is available with what it costs you per day you hold it. If that difference is positive, the vehicle carries its share of overheads; if it is negative, one good month of bookings only hides the problem.

The fleet average is the worst possible indicator for an operation of five to forty vehicles: two or three models in high demand almost always offset the ones asleep on the lot, and you end up renewing the wrong cars. This article sets out the cost lines to isolate, how to measure revenue per available vehicle, and the test that decides between keeping, replacing and retiring a vehicle.

The cost lines to isolate per vehicle

A per-vehicle calculation is only worth something if every euro spent is attached to a registration plate. The habit to build: as soon as an invoice arrives, it carries a plate number, including the small ones, a set of wiper blades, a roadworthiness test, a bodywork repair before resale. Without that, servicing disappears into one global line and the most expensive vehicles stay invisible.

Revenue per available vehicle

A vehicle's turnover tells you nothing on its own. What counts is net revenue set against the number of days that vehicle was genuinely rentable. State the formula in words: take the revenue collected over the period, strip out everything that is not rental, re-invoiced fuel, delivery charges, options passed on, commission and payment-handling costs, then divide by the number of available days. You get a revenue per available vehicle, comparable from one model to another and from one season to another.

Three categories of day

• Rented days: the car has gone out and the rental is collected.
• Available but unrented days: the car is ready, on the lot, with no customer. That is demand or pricing, not operations.
• Unavailable days: workshop, waiting for parts, loss assessment, preparation, administrative hold. That is operations, and it is often where the margin vanishes.

Separating the second and third categories changes the decision. A vehicle that rents rarely because demand is missing calls for a commercial or pricing move. A vehicle that rents rarely because it spends its weeks in the workshop calls for an exit, even if its utilisation rate measured only on available days looks respectable.

Holding margin, vehicle by vehicle

Once both sides are measured, the holding margin is calculated in four steps, always per day so that a vehicle that arrived in January can be compared with one that arrived in July.

1. 1Bring the vehicle's net revenue down to a revenue per day of holding, not only per day rented.
2. 2Bring each line of the table down to a cost per day of holding over the same period.
3. 3Subtract: you get the vehicle's daily contribution.
4. 4Compare that contribution with the share of overheads you allocate to one vehicle, lot rent, wages, software, professional liability cover.

A vehicle whose contribution is positive but smaller than its share of overheads is not one to rush out of the fleet: it still helps carry the structure, and replacing it may cost more. A vehicle whose contribution is negative destroys value every day it stays on the lot, bookings or no bookings.

Keep, replace or retire

The decision boils down to one question: does one more day of holding bring in more than it costs, allowing for the depreciation that keeps running and the repairs that are coming? The three outcomes have fairly clear signatures.

Keep the vehicle

A positive, stable daily contribution, rare downtime, depreciation largely behind it, predictable servicing. A written-down, reliable vehicle is often the most profitable in the fleet: its holding cost has melted away while its rental rate still follows the market. As long as demand is there and the condition of the car stands comparison with the rest of the local supply, keep it and simply watch its workshop days.

Replace the vehicle

A contribution still positive but eroding, servicing invoices arriving more and more often, workshop days rising, a segment where demand has moved. Replacement is justified when the next vehicle promises a higher contribution once its financing, its depreciation and the seasonality of its category are taken into account. Do the calculation with the candidate vehicle in hand, not with an impression.

Retire the vehicle from the fleet

A negative contribution, a heavy repair announced, a category you no longer sell, or a vehicle whose condition demands reconditioning worth more than it will ever earn. Two details weigh on the timing of the exit: the state of the used-vehicle market for that model, and the real delay between the decision and the money arriving. A vehicle waiting for a buyer goes on costing you insurance, space on the lot and depreciation.

The mistakes that distort the calculation

• Mixing the security deposit with revenue: a deposit is not turnover.
• Forgetting the preparation days between two rentals, which are paid fleet time.
• Counting depreciation only at resale, when it runs every single day.
• Charging servicing to one global line instead of to the plate concerned.
• Comparing two vehicles over periods of different length without bringing everything back to a day.
• Treating a fine or an unrecharged claim as bad luck, when it is a recurring cost of the trade.

Fill the available days before buying one more vehicle

Before growing the fleet, the cheapest lever is still filling the available days you are already paying for. That is also where a marketplace can help: on DRIVO, listing a fleet costs zero euros, with no listing fee and no monthly subscription, and commission applies only to completed bookings, so an empty week costs the agency nothing. Listings are published in five languages, which opens demand beyond the local customer base, and payouts are automatic through Stripe. On the operational side, the booking, calendar and fleet-management back-office also serves to track the available and unavailable days this calculation needs, while verified profiles and reviews do the job of a neighbourhood reputation at the scale of Europe and North Africa.