10 Ways to Reduce Fleet Management Costs (Part 2)

10 Ways to Reduce Fleet Management Costs (Part 2)

Read the first part of the article here.

6. Lower Fleet Management Cost

The largest component of TCO is almost always the depreciation of any given asset. However, fuel may exceed depreciation for very high-mileage, low-acquisition cost fleets. At any rate, achieving the lowest vehicle acquisition cost possible is paramount to reducing fleet management costs. Even fleet novices understand that the lowest acquisition cost is not necessarily the optimal vehicle to acquire because the resale value of the vehicle plays a pivotal role in TCO.

Lower Fleet Management Cost

Increase fee for fleet ownership

7. Assure Higher Resale Value

Previous sections of this article have dealt with the importance of managing depreciation and selling a vehicle at the economically optimal point in its lifecycle. Corporate fleets typically sell and average of 16 percent of its vehicles to employees (10 percent on the low end and more than 20 percent at the high end, depending on the industry). The advantages of driver/employee sales include:

  • Faster receipt of proceeds.
  • Higher residuals (priced a bit higher than wholesale).
  • Driver takes better care of the vehicle.
  • Auction and transportation fee savings.

8. Lower Maintenance Costs

Often, fleet managers adhere to outmoded beliefs for preventive maintenance (PM) practices, such as the belief that a PM should be performed every 3,000 miles. Such frequent PMs are only required for vehicles that operate under “severe” duty as defined by the OEM. Executive decision makers should consult with their fleet managers to determine the ideal practices for the company’s fleet, using OEM recommendations as a resource.

Maximize Maintenance Efforts and Life cycles

Lower Crash Costs

9. Lower Crash Costs

The safe operation of employer-provided and employee-provided vehicles is of paramount importance in a well-run fleet management organization. An effective safety management program provides many benefits that have a direct impact on profitability:

  • Reducing the risk and cost of accidents and injuries.
  • Reducing the cost of insurance.
  • Increasing driver productivity.
  • Enhancing driver morale and retention.

10. Lower Overhead Costs

Overhead costs, also known as indirect costs, include the cost of fleet management and administrative staff, buildings and facilities, including fuel sites, computer systems, utilities, tools, taxes, and many other factors that cannot be attributed directly to a vehicle. While no set formula exists for calculating the percentage of a fleet budget devoted to overhead, an Activity Based Costing (ABC) exercise is useful for identifying the sources of these costs as a first step.

Lower Overhead Costs