Calculating Fleet TCO (And Ways To Save)
Transportation is an essential part of many businesses. Company vehicles are often used as an employee perk, commutes to and from business-related activities, and shipping goods and services. For some establishments, fleets are products like moving vans and car rentals. Initially, business owners might use personal vehicles, outsource their shipping needs, or rent vehicles on an as-needed basis; an increase in demand may require fleet ownership.
Benefits Of Owning A Fleet
There are several advantages to owning a fleet. Businesses can select the best vehicles for their operations. They can also avoid hassles like vehicle availability and have more control over the quality and efficiency of services. Fleet ownership also means free advertising, as companies can add logos to enhance brand awareness. Implementing efficient fleet management and tracking practices can also reduce common obstacles with monitoring employees and issuing reimbursements.
Fleet Total Cost of Ownership
One of the most significant disadvantages of investing in a company fleet is the total cost of ownership (TCO). Most people know that owning a vehicle goes beyond the purchase price. You must also keep up with insurance, gas, maintenance, and repairs. These expenses can be burdensome if you apply that to five or more vehicles of varying types and sizes.
Before investing in company vehicles, business owners should evaluate the TCO and identify ways to save to avoid turning their assets into liabilities. Continue reading to learn more.
How much will it cost you to purchase vehicles for your business? Start by assessing your company’s needs. What types of vehicles do you need? What purpose will they serve (employee perks, shipping, business travel, etc.)? What features and tech are most essential? Finally, how many vehicles will you need?
Next, determine how you plan to pay for your fleet. Will you use cash, dealership financing, or apply for a loan? Evaluate your budget and the average market rate to determine a reasonable purchase price.
Money-Savings Tips: Buying used vehicles, leasing, and negotiating deals are all effective ways to save money on your purchasing costs. You can also look for business grants that cover all or some of your out-of-pocket expenses.
Once you’ve purchased your fleet, you’ll need to invest in insurance. It’s a necessary and beneficial expense that protects your company, employees, and vehicles. However, commercial auto insurance can cost an average of $900-$1,200 a year per vehicle.
Money-Saving Tips: Fortunately, there are practical ways to reduce the cost of insuring your fleet. For starters, you should always shop around for the best rates. You should also take advantage of discounts like bundling policies, safe driver promotions, paying policies annually, and enhanced vehicle security.
Another ongoing expense for fleet owners is gas. As fuel costs continue to rise, it becomes a significant burden for businesses.
Money-Saving Tips: There are various ways to save on fuel costs. One option is to use fuel cards, which provide discounts on gas and other transportation-related expenses. Fleet owners should also implement effective strategies to reduce mileage and preserve fuel. Some examples might include installing tracking devices, using navigational systems, and establishing fuel-saving driving practices for drivers.
Maintenance And Repairs
Last but not least, is fleet maintenance and repairs. These expenses are expotentially higher for fleet owners, because they have multiple vehicles to service and often put more wear and tear on their vehicles. As a result, companies can expect to pay as much as $0.18 per mile per vehicle on maintenance and repairs. Failure to keep up with maintenance and repairs puts your drivers at risk. It also reduces vehicle efficiency, function, and lifespan, which come with additional costs.
Money-Saving Tips: Invest in quality vehicles, teaching sound driving practices, utilizing warranties, and negotiating rates with mechanics can help fleet owners keep these costs to a minimum.
Owning a fleet of cars or trucks provides many benefits to businesses. However, fleet ownership comes with a hefty price tag. While this shouldn’t discourage you from investing in a fleet, you must do your due diligence. Identify the initial and ongoing costs of owning a fleet to ensure it fits your budget. Finally, develop strategies like those listed above to help you keep costs under control.