Fuel contracts aren’t child’s play. They can take you for a ride that you don’t want to go on. But you’re not going to know until it’s too late. First, what you’re going to hear from the salesman is a glowing report.
That opening salvo is designed to get you to sign away, often for years, and without recourse to action that will be positive for you once the prices have been locked way up to the seller’s favor.
What South Carolina should know about fuel contracts can keep you from a costly piece of paper that jails you into cutthroat rates that have the power to destroy your business and make you bankrupt.
Here are the basic points of fuel contracts:
Fuel contracts are simply an agreement between your fleet company and the fuel owner or broker, who selects a static price. This is meant to save you money – so you’ll be rewarded for using a certain amount of fuel and shielded from negative changes in the market price.
The flip side is you may also be locked out of lower prices should they become available, so it pays to know the market, what you use and what you’ll need.
What You Get:
You’ll be guaranteed an amount of fuel at a set price. The vendor will be responsible for delivering that product to you at specific intervals. Certain vendors also have credit card or fleet card programs that can allow you to purchase fuel on the road and keep data on your spending habits.
Often these cards come with extra fees attached.
Here are the pitfalls to first keep in mind:
When you don’t negotiate price, you’re stuck with what you sign. You’ll end up with a contract that is guaranteed but leaves you with nothing, because it was never actually designed with your business or your fleets in mind. It was rather designed mainly – or only – to benefit the vendor.
When you choose the contract vendor’s credit card, that plastic may come with hefty fees. Accrued over time they can be a terrible ball and chain that will suck out your earnings and cost you the very savings that the contract was meant to provide.
The price markup can even extend to the gas itself, which is also not the best way to get the discount that you’re looking for. Make sure the gas rates you’re locking in are actually competitive with the market, and not just a bargain according to the plan itself.
You have a decision to use branded or unbranded fuel. Each of these may be the right option for your fleet, but you need to get the right information to discover how to move forward with the most savings. While the allure of brand fuels may strike you as an advantage, a competitive unbranded variety can give you more value.
Fuel contracts, when negotiated smartly, can give your company a leg up on high priced gas and keep your fleet running strong. Knowing what is standard practice and how to get the most out of a deal is important.
Don’t just take the first offer that comes your way.