Timing is everything – and fleet managers know this rings true when it comes to cycling your fleet vehicles. Do you know the ideal time to replace a vehicle? Many fleet managers struggle deciding when the perfect time is, mainly because many believe it’s more cost effective to keep those older vehicles running.
As someone who is responsible for fleet, wouldn’t it be nice to able to save $.25 million in 10 minutes?
Read on and learn the guidelines to fleet replacement and cycling.
Why do Fleet Vehicle Cycles Matter?
Today, many businesses rely on vehicles to transport goods, make deliveries, meet with clients or conduct their normal day-to day-routines. In the fleet industry, knowing the importance of the vehicles optimal cycling point is absolutely critical to milking the value out of your fleet. In order to achieve the highest return on investment while minimizing total cost of ownership of the vehicle, mastering the fleet cycling model will make sure your company’s leadership is happy and your fleet is on the move.
Replacing your vehicles at the right time can benefit your fleet in many ways, but there are many things to consider when deciding what exactly is the right time. Are you taking the correct steps to track your costs? Are your company’s financial goals and your fleet’s operation strategies aligned? Do you have the data that tells you when it's best to cycle your vehicle?
Let’s consider this scenario:
At 60 months in service and 125,000 miles driven, your light-duty truck is fully depreciated. Should you replace the vehicle or keep it around for 24 more months until it reaches 175,000 miles?
When deciding when to replace a vehicle you should consider mileage, age, and usage. Mileage and age can increase maintenance and repair costs. For example, maintenance on the old asset runs around $1,451 while a new asset could cost only $500. Also, with the old asset, you will be looking at a costly repair. Now you’ve inadvertently added to your operation costs. Not only are you taking dollars away from you bottom line repairing an old asset, you’re increasing your fleets downtime.
Maintaining the asset for two more years increases your operating costs by $0.015 per mile. To put this in perspective, over the life of one vehicle you are look at $2,625. Say your fleet is 100 vehicles… that’s close to $262,500 (ahem, a quarter of a million dollars).
In addition, cycling your vehicles allows you to reduce your TCO by taking advantage of different manufacturer incentives and factory order pricing, minimizing acquisition costs, maximizing the proceeds from resale, and therefore managing effective depreciation. Depreciation, fuel, and maintenance are all major contributors to your fleet’s total cost of ownership, and all of them can be managed and minimized by setting and adhering to the appropriate cycling parameters for your fleet.
Improving Fleet Cash Flow
Fleet vehicle replacement improves your cash flow by preparing for the unexpected. By cycling out your aging vehicles, you’re mitigating non-preventative failures. These costly expenditures end up holding up once free cash flow and ruin your profitability.
When your fleet vehicles are refreshed, you’re more able to accurately forecast and budget for those typical expenses, like fuel and maintenance.
Reducing Your Fleet’s Overall Downtime
Arguably one of the biggest advantages of cycling is the reduced overall downtime. Older vehicles require more unscheduled maintenance repairs – yeah, we’re not a fan of these either. Not to mention those costs attributed to unscheduled repairs. This can be catastrophic to any company because these unplanned costs quickly eat away at the bottom line.
During the vehicle’s life, it comes to a point where it’s no longer financially viable to keep it on the road. Repair after repair after repair eventually exceed the residual value of the vehicle.
Bottom line: you’re paying more money to your maintenance shop than you’re investing in your fleet drivers. You’re also receiving no value from the vehicle sitting in that shop. Setting and adhering to the correct replacement schedule for your fleet means less downtime and less chance of your drivers (and vehicles) in danger.
Mastering Fleet Safety
Having older fleet vehicles means they’re not up-to-date on the safety features. Outdated or less effective safety features = your drivers will feel unsafe and undervalued. Just after a few years, major safety and technology upgrades can mean the difference between your vehicles on the road or in the shop.
Let’s walk through the latest and most important safety features on up-to-date vehicles.
- Automatic emergency braking (AEB) detects a forward crash with another vehicle and automatically applies the brakes.
- Blind-spot warning (BSW) provides the driver a visual alert that a car is in their blind spot.
- Lane-departure warning (LDW) alerts the driver either visually, with sound, or seat vibration when the driver is veering out of their lane and wants them to get back in.
- Lane-keeping assist (LKA) actually pulls your vehicle back into your lane if you are veering out of it.
- Adaptive cruise control adjusts the speed to maintain and safe distance away from the car in front of you.
The best way to keep up with the latest and greatest safety features is to determine a replacement cycle. Providing your employees with the newest vehicles improves your company image and employee morale.
Along with keeping up with safety features, newer vehicles are also more fuel-efficient. More fuel-efficient vehicles will be more cost efficient and more environmentally friendly.
Maximize Your Fleet Vehicle’s Resale Value for Good
Be proactive, not reactive. Sure, you can continue to pay money on vehicle maintenance, but you’ll add mileage in the process. This affects your fleet vehicle’s resale value (another huge factor in getting that ROI on your fleet).
You can effectively manage 70-80% of your total cost of ownership just by cycling. Effective cycling parameters for your vehicles reduce the amount of wear-and-tear a vehicle sees before you remarket the unit. By aligning the correct dates to cycle aging vehicles, you will rid your business of the dreaded maintenance phone call that ends in, “This vehicle is going to cost you $$ and it’s going to take me more days to fix it.”
Maximize your profit on these vehicles by learning more about what benefits new vehicles have to your fleet and business operations (updated for 2019 accuracy). Click here to download.