Setting Up a Loaner Fleet
It’s a common hassle for customers facing a major repair: They drop their cars off and are subsequently left without the necessary transportation to go about their daily lives.
Anything that can alleviate this problem, like a loaner fleet, is a welcome service for these customers, but, as a shop owner, it’s difficult to know whether it’s best for you and your customer base.
Ratchet+Wrench talked to Seth Thorson, owner of Minnesota-based Eurotech Auto Service, who described how and why he started his loaner program. Michael Graham, president of aftermarket insurance broker AutoRisk, weighed in on some major liability issues with starting and maintaining a loaner fleet program.
Benefits of the program:
Eurotech is located in New Brighton, a Twin Cities suburb. Thorson says the shop is a bit out of the way for people looking to bring their cars in, so he needed to offer alternative forms of transportation for those facing a major repair.
Thorson says his company knew from the beginning that pairing with a rental company wouldn’t fit with its model. Thorson was disinterested with the paperwork and uncertainty that pairing with the local Enterprise would have brought his business, as he says the company was almost always out of cars.
He says that having a fleet allows him and his staff to be flexible with its hours and overbook for appointments. Eurotech is closed on weekends, so the option of giving a loaner car to a customer facing a lengthy repair is a nice bonus.
“I know that once I have the car here, I can usually tell the customer that, if something happens, they can use the loaner car,” Thorson says.
The fact that loaner services are included with the cost of repairs allows Thorson and the rest of his team to convert customers who are on the fence, and is a great differentiator from other businesses without the service.
“If something goes wrong or out of your control, you can get them in a car,” Thorson says.
What you need to set it up:
Depending on the shop and amount of technicians you have, you may need anywhere from two to 10 loaner vehicles to service your customer base. Eurotech brings in about 180–200 cars per month into its 7,800-square-foot shop, so its eight-car fleet generally keeps up with demand.
When acquiring these cars, Thorson went about it two separate ways over the 10-year lifespan of Eurotech’s program. The shop started its fleet by purchasing older Mercedes and BMWs from clients unwilling to pay for extensive repairs. When those started taking too much time and money to repair, they started leasing Volkswagen Jettas and BMWs from local dealerships.
To cover the cost of operation, Thorson set up a transportation budget, which he says is anywhere from $1,500–2,000 per month. This covers the maintenance and leasing of his loaner vehicles, along with his shuttle and ride-sharing programs.
Maintaining your fleet:
Before leasing the vehicles, Thorson says he spent about $150$200 monthly per car maintaining the fleet. However, Thorson said the constant in-house repairs ate into his revenue, especially when his shop was at capacity.
Since Thorson currently leases the entirety of his loaner fleet (most of which are under maintenance by the manufacturers), maintenance for his vehicles simply involves taking his car down to the dealership. Thorson says this is the best way to avoid maintenance costs and avoid major liability issues.
Not every insurance company would cover his fleet, so Thorson lost some ability to shop around for better coverage rates.
This also creates liability issues where, depending on the state, your auto shop can be held responsible for any damage incurred by the driver.
“If I loan you a car, I’m basically loaning you my insurance,” Graham says.
Most states allow the shop owner to transfer comprehensive and collision insurance to the borrower in an accident, but with most states, including Graham’s home state of Colorado, liability cannot be transferred.
In Thorson’s home state of Minnesota, he is able to transfer liability up to the owner’s limit. Thorson makes sure that anyone who uses one of Eurotech’s loaner cars signs a loaner agreement, which transfers all insurance onto the borrower. He carries additional umbrella insurance for any liability damage above the borrower’s limit.