CAFM Financial Management & Budgeting 5 — Questions and Answers
Question 1: A fleet manager must present a business case for telematics. Which financial argument is MOST compelling to a CFO?
- The system provides real-time GPS maps
- Projected fuel and maintenance savings exceed the system cost within a defined payback period (Correct answer)
- Drivers prefer the interface
- The vendor offers a volume discount
Correct answer: Projected fuel and maintenance savings exceed the system cost within a defined payback period
CFOs respond to quantified financial returns; a clear payback period tied to measurable fuel and maintenance savings is the most persuasive financial argument.
Question 2: Which cost component is typically the LARGEST single expense in a fleet's total cost of ownership?
- Insurance premiums
- Fuel costs
- Vehicle depreciation (Correct answer)
- Driver salaries
Correct answer: Vehicle depreciation
Vehicle depreciation generally represents the largest single cost component in fleet TCO, particularly for high-value units with rapid value loss in early years.
Question 3: A fleet manager is asked to reduce the annual fleet budget by 8%. Which strategy would have the LEAST negative impact on operational capability?
- Eliminating all preventive maintenance
- Optimizing the replacement cycle to reduce the number of vehicles in the fleet (Correct answer)
- Cancelling all insurance policies
- Reducing driver training to zero
Correct answer: Optimizing the replacement cycle to reduce the number of vehicles in the fleet
Right-sizing the fleet by optimizing replacement cycles reduces asset costs without compromising safety or operational readiness, unlike cutting maintenance or insurance.
Question 4: What is the purpose of an 'accrual' in fleet budget management?
- To delay payment of vendor invoices
- To record an expense in the period it is incurred, even if not yet paid (Correct answer)
- To carry unused budget funds into the next fiscal year
- To allocate cash reserves for emergency repairs
Correct answer: To record an expense in the period it is incurred, even if not yet paid
Accruals ensure expenses are recognized in the accounting period they relate to, providing accurate period-over-period cost comparisons.
Question 5: When benchmarking fleet costs against industry peers, the MOST meaningful comparison metric is:
- Total fleet spending in dollars
- Cost per vehicle per day or cost per mile by vehicle class (Correct answer)
- Number of fleet managers per vehicle
- Total miles driven per year
Correct answer: Cost per vehicle per day or cost per mile by vehicle class
Normalizing costs per vehicle per day or per mile by class removes the distortion of fleet size differences, enabling valid peer comparisons.
Question 6: A fleet manager discovers that 10% of the fleet sits idle more than 80% of the time. The BEST financial response is to:
- Increase insurance coverage on idle vehicles
- Dispose of or redeploy the underutilized vehicles to reduce carrying costs (Correct answer)
- Schedule more frequent maintenance on idle vehicles
- Assign additional drivers to ensure vehicles are used
Correct answer: Dispose of or redeploy the underutilized vehicles to reduce carrying costs
Eliminating or redeploying chronically underutilized assets removes fixed depreciation, insurance, and storage costs that yield no operational return.
Question 7: Which of the following best describes 'remarketing' in fleet financial management?
- Advertising the company's fleet services to new clients
- The process of selling or auctioning used fleet vehicles to recover residual value (Correct answer)
- Renegotiating lease rates with the original lessor
- Reallocating vehicles between departments
Correct answer: The process of selling or auctioning used fleet vehicles to recover residual value
Remarketing refers to the planned disposal of used fleet assets through sale channels designed to maximize residual value recovery.
CAFM Financial Management & Budgeting 5
A fleet manager must present a business case for telematics.
Which financial argument is MOST compelling to a CFO?