UNDERSTANDING FLEET FINANCE

By Marc Gelbke The last piece of my series “puzzle” on golf cart fleets is to cover what may be the most important part, and that is fleet finance. What is fleet finance? It is to determine whether or not the cost of the fleet you have in mind is suitable for your facility, and will strongly depend on how much revenue you expect the carts to bring in, as well as the expenses involved in setting them up and operating the program. Another aspect is, of course, how much profit you would like to make with your fleet program. As a general rule, fleet size, rental rates, and cart per rounds should generate income that averages about $1,900 per cart annually. To calculate your number for your facility, you need to forecast golf cart revenue, expense, and profit. Factors you need to take into account when forecasting revenues are cart rental fee charged, cart rounds, number of carts, the trade-in value (if properly serviced it can be 25%-40%), and other income (private or member carts). For the expense side, you need to account for operating expenses (cost of gas or electricity, cost of parts for repairs and labor), acquisition cost – which is two-fold and includes the interest on the purchase loan and/or your leasing charges, and other costs such as storage, cart paths, etc. On average and to figure hard numbers, you can use the rule of thumb of $3 per round for operating expenses. Your next step is going to be to determine your estimated gross revenue (EGR), and the factors you need to determine your EGR are number of carts in your rental fleet, number of rounds per cart, and your rental fee. For example: 57 carts x 185 rounds per cart = 10,545 rounds annually X $17 rental fee = $179,265 gross revenue; 10,545 total rounds X $3 = $31,635 operating expense; $179,265 revenue – $31,635 expense = $147,630 net operating income (NOI); $147,630 NOI – 25% trade-in value ($29,526) = $118,104 estimated annual profit. In closing, as you can see from the example above, managing your cart fleet is an important and vital part of every golf course operation that operates carts, and you as manager should be involved in your fleet program to make sure carts are being maintained properly and serviced on a regular basis to maintain the highest trade-in value possible, which will strengthen your bottom line and keep your golfers and guests happy.