Knowing how much your fleet costs you per kilometre is the best way of working out how expensive your fleet is.
If you want to know how much your fleet is costing you overall [its total cost of ownership (TCO)] you need to have insight into every static and moving cost associated with it.
However, not enough companies know just what their fleet is costing them.
In fact, recent research in the UK showed only one out of ten companies knew their fleet’s total cost of ownership – and it’s probably far less than that for those running fleets in South Africa.
To understand how much your fleet is costing you, you need to analyse direct costs:
- depreciation
- interest
- vehicle repair
- maintenance
- tyres
- fuel consumption
- insurance
- tax
- fleet management fees
Then, you also need to look at the indirect – or hidden – costs. These can be harder to identify, but have a significant impact on the total cost of your fleet. These aspects include:
- the time you spend on fleet management processes
- administration
- employee productivity factors such as driver downtime and motivation.
The best way of working this all out is to compare apples with apples – work on a per kilometre basis, because you may have one vehicle that doesn’t travel great distances, but spends most of its time idling, and one that goes long distance. A vehicle that spends more time in traffic will idle for longer, causing more wear and tear, and pushing the cost up. To work out total cost of ownership per kilometre, take the TCO and divide by how far the vehicle has driven over a period of time.
This will give you greater insight into where your costs are going, and help you optimise your fleet.
Informed decisions
When you understand what your fleet costs you, you can make informed decisions such as which aspects you should be outsourcing, or where to improve productivity. You can even use these insights to more accurately schedule maintenance, so that the service cycle doesn’t impact on your ability to keep vehicles on the road.
After all, total cost of ownership is the most meaningful and accurate way to calculate your fleet’s cost – and will also give you insight into when it is time to retire a vehicle – because it’s just costing too much to keep on the road. The larger your fleet, the lower cost per kilometre on average because economies of scale kick in, but bear in mind, this may be skewed depending on the age of the vehicle – with year one and seven being the most maintenance intensive because those are mostly the years when you’ll need to do major maintenance work.
Beyond the purchase price
Don’t just consider what a vehicle costs you to buy when you work this out. Look at other aspects such as when it will need servicing, emissions – which you pay for via tax, fuel consumption - and read up on reviews to see if what looks like a cheap purchase may turn out to be an expensive one.
When you buy a vehicle, consider the following, which should be included in the original costing:
- Payload requirements (fuel costs can increase by as much as 30% when vehicles are overloaded), and this will have a long-term impact on maintenance spend and tyre use, resulting in a ‘cheap’ vehicle costing far more than the right vehicle.
- Average monthly kilometres and place of travel (diesel vehicles will save between 35-50% on fuel if the vehicle travels more than 4 000 km in rural environments);
- Vehicle reliability (some manufactures have a far better record than others in terms of reliability);
- The cost of the vehicle standing.
It costs you money when a vehicle is off the road if it’s suddenly broken down – money in lost revenue, profit, and future clients when word of mouth gets around that you’ve missed a vital delivery. This can be avoided by monitoring total cost of ownership, because it will also raise red flags that a vehicle may break down if the cost jumps from one measurement cycle to another.
Total cost of ownership is the most sensible way to keep an eye on what your fleet’s actual cost is, and avoid expensive, and unplanned, maintenance.
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