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Managing a Fleet of Loaner Vehicles

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One of the biggest points of stress for customers bringing their vehicles in for repair is a lack of transportation, says Vernie Menke, owner of Menke’s Automotive Repair in Newburgh, Ind. Hoping to make the repair experience as painless as possible, Menke decided to create his own free loaner car program.

Six years later, he now manages a fleet of 28 loaner vehicles, which he says have become integral to his business. Menke discussed how he created the program and manages the large fleet.


What prompted the creation of your sizeable fleet?

The biggest reason that we have loaner cars is that it takes a lot of the stress out of your customer’s life. When they get their car fixed, they’re concerned about how they’re going to get to work, to the store, to their kid’s school. Everyone wants to stay on the go. Even shuttle service isn’t enough. We can turn a customer around in our front desk in three or four minutes.

So it creates a lot of customer loyalty. You can market it, and it makes the customer’s decision a lot easier about where they’re going to go. It makes them think of you first. We run it in our TV commercials, our radio stuff, any marketing materials.

From the shop perspective, your shop can gain huge market share and a huge advantage over your competitors with no loaner programs. We’re the only independent in our area with a loaner car program. We’ve had our program for six years and we’ve just continued to make our business grow.

It allows us to stockpile work. With as many cars as we have right now, if a customer calls and our schedule is full, we can tell them to drop it off, pick up a loaner car and we’ll fit them in the schedule when we can. You can keep the shop full of work.

It also helps if you run into a problem with a repair, such as the wrong parts, and it takes longer than expected. The customer isn’t as upset. It takes a lot of stress off of the shop. We just tell them, “You can have the car as long as we have your car.”

Our customer base continues to go up and our business continues to grow. We had a record year last year; we’re already on track to have another record year.


How did you decide how many vehicles you needed?

You should not start the program until you have enough cars. You’ve got to have the right amount of loaner cars. If you don’t, someone will promise a customer a car, and then someone else will and all of a sudden, you’re out of cars. So I counted how many cars we had in the shop on any particular day and it was 14. I decided that we would not start the program until we have at least 14 vehicles.

We have steadily added on cars since then and right now we have 28 cars. Partly because we have grown, but partly because we have the ability to stockpile work and I want to keep my techs busy at all times.


What was your strategy in finding the vehicles?

It took me a year to get the program together and gather all of the vehicles. We started gathering vehicles with the cars that came into the shop. We bought several of our cars from customers that had bad engines or transmissions and didn’t want to fix them. Some customers have even come in and just given us the title. For example, we bought a 2005 Chevy Aveo with 60,000 miles on it for $600 because it had a broken timing belt. It was like new but the owner said they didn’t want to fix it. We put a timing belt in it and the car was good to go.

Another way I found them was through watching the paper and keeping my eyes open for them while driving. If you see a car in somebody’s yard that’s been sitting there for a while, there’s a good chance there’s something wrong with it that they don’t want to fix. You can buy those cars for next to nothing.

That being said, you do need to be selective. You need to look the body over and make sure you’re not going to spend a lot of money on the paint and bodywork. Also check the interior and make sure it can be cleaned up. We run them through the shop to make sure they’re safe before we turn them loose.

We also try to get a mix of makes and models. We try to match the customer to whatever car they drive. If they have a GM, we put them back in a GM vehicle. The reason being is that they’re familiar with all of the controls and design of the car.

We also have two minivans for the moms with kids and a three-quarter-ton pickup truck for contractors.


How do you handle the maintenance on the vehicles?

I’ve got two full-time maintenance guys, and they are the ones who maintain the loaner cars and check the car over, vacuum, refuel and put the car back in rotation. The initial cost of getting them up in shape is normally the biggest expense. We service them every 3,000 miles and do a full inspection on them.


What is the setup for insurance coverage?

You cannot carry full coverage insurance on these vehicles, so basically the only choice is liability. If something really bad happens, you’ve got to be in the position to throw the vehicle away.

The way the insurance is set up in our loaner car form is that the customer’s insurance is always first. Meaning, if they total your car, their insurance company has to pay for it. We also have a really good insurance company that covers these cars and we put a couple million dollars of extra liability umbrellas on top of that.

When we started this up, I met with my accountant, attorney and insurance company and asked how we can protect ourselves. What they suggested, and what we’ve done, is form three separate companies. So we formed a loaner car company and the only thing that’s in that company is the loaner cars. If something bad happens with a wreck and they come after you, the only thing they can get is the loaner car.

We have a separate auto repair company, and our property is in a third company. You put up firewalls to protect you from the loaner cars.

Each company has to be functional limited liability companies (LLCs), meaning there has to be functionality to it. It can’t be a ghost company. For us, since we give the loaner cars out free, that company won’t generate money. So the auto repair company pays the loaner car company $10 for every car used. We track that on our invoices and it gets zeroed out with the customer. But when it goes to the office, we write a check to the loaner car company once a month. Also in that contract, the company agrees to maintain those vehicles.


What is included in the loaner car form?

We have a standard loaner car agreement form that we created with our attorney. On the one side, it has customer information, insurance information and vehicle information, and on the back, it has all of the legal information.

When the customer comes in, we also get a copy of their driver’s license and current insurance card. It is absolutely crucial that these two forms are current.


Do you ask the customer to fill up the car with gas?

We put a quarter-tank of fuel in them for the customer and we ask them to bring it back with the same amount of fuel in it. Or they can pay us for fuel when they come back in. What we’ve found is that a lot of people bring them back with a full tank of gas.

We sit almost three miles from the nearest gas station, so we put our own fuel tank in here. It sits inside a metal storage building so no one can steal the gas. Whenever the cars come back in, if they need fuel, we can fuel them on site and check them back in.


How do you keep track of all the vehicles?

We use a loaner car board to track these cars and can tell which cars are ready to go out, need service, or are in use. It is a huge white board with a grid divided into 28 squares. Each car has a labeled spot on the grid.

If the keys are hanging on the board in their spot and there’s a check mark by it, that means the car is available. When a car is checked out, they erase the check mark and write the customer’s name in the spot. When the car comes back in, the keys get thrown in a can on the front counter.

You have to have a system of tracking. It sounds complicated, but once you get the system down, it’s not a big deal. 

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