CAFM Asset Management and Acquisition 4 — Questions and Answers
Question 1: Which depreciation method allocates an equal expense amount for each year of a vehicle's useful life?
- Double declining balance
- Sum-of-the-years'-digits
- Straight-line depreciation (Correct answer)
- Units-of-production depreciation
Correct answer: Straight-line depreciation
Straight-line depreciation divides the asset's depreciable cost evenly across its estimated useful life, producing equal annual charges.
Question 2: A fleet manager notices that a specific vehicle model has a high residual value after 3 years. How does this affect a lease decision?
- It increases monthly lease payments
- It decreases monthly lease payments because the lessor recovers more at vehicle return (Correct answer)
- It has no effect on lease payments
- It makes leasing impossible for that vehicle
Correct answer: It decreases monthly lease payments because the lessor recovers more at vehicle return
Higher residual value means the lessor expects to recover more money when selling the returned vehicle, so lower depreciation is built into monthly payments.
Question 3: What is 'whole-life costing' in the context of fleet asset management?
- Calculating only the purchase price of a vehicle
- Analyzing all costs from acquisition through disposal over the vehicle's entire service life (Correct answer)
- Estimating only fuel and maintenance expenses
- Measuring the cost of a driver's entire career
Correct answer: Analyzing all costs from acquisition through disposal over the vehicle's entire service life
Whole-life costing (also called life-cycle costing) captures every cost phase — purchase, operation, maintenance, and disposal — for complete financial comparison.
Question 4: A fleet manager wants to add telematics devices to newly acquired vehicles. At which stage of the procurement process should this requirement be addressed?
- After vehicles are delivered and in service
- During the vehicle specification and bid document preparation phase (Correct answer)
- Only when vehicles are due for replacement
- When the insurance carrier requests it
Correct answer: During the vehicle specification and bid document preparation phase
Including telematics requirements in specifications ensures vehicles are provisioned correctly at acquisition, avoiding costly retrofitting later.
Question 5: Which of the following is an example of an 'operating lease' characteristic?
- The fleet organization records the vehicle as an owned asset on its balance sheet
- Lease payments are structured so the vehicle is not fully amortized during the lease term (Correct answer)
- The lessee assumes full ownership risk at lease inception
- The total lease payments equal 100% of the vehicle's value
Correct answer: Lease payments are structured so the vehicle is not fully amortized during the lease term
An operating lease does not fully amortize the vehicle's cost, leaving significant residual value with the lessor at lease end.
Question 6: When evaluating a Request for Proposal (RFP) for fleet vehicles, which evaluation criterion goes beyond price alone?
- Vendor's physical location relative to fleet headquarters
- Best value analysis including quality, service support, and total cost of ownership (Correct answer)
- The color options offered by the manufacturer
- Number of years the vendor has been in business
Correct answer: Best value analysis including quality, service support, and total cost of ownership
Best value analysis scores multiple factors — price, quality, delivery, warranty, and support — rather than awarding solely on low bid.
Question 7: A fleet organization wants to reduce capital expenditures by sharing vehicles across departments. This strategy is known as:
- Fleet pooling or motor pool management (Correct answer)
- Parallel fleet operation
- Decentralized asset ownership
- Dedicated vehicle assignment
Correct answer: Fleet pooling or motor pool management
Fleet pooling centralizes vehicles into a shared motor pool, reducing the total number of assets needed while maintaining adequate coverage across departments.
CAFM Asset Management and Acquisition 4
Which depreciation method allocates an equal expense amount for each year of a vehicle's useful life?