Fleet Total Cost of Ownership
Fleet Total cost of ownership (TCO) takes into account all direct and indirect running costs when selecting a vehicle. This ensures you are getting the right vehicles for your fleet and do not incur any unforeseen additional costs.
A full TCO approach will include direct costs such as funding, maintenance, depreciation, fuel, taxation and insurance. TCO facilitates making effective comparisons between different vehicles leading to effective vehicle selections and reduced risk across the fleet.
Vehicle policy based on TCO should be how your drivers select their vehicles and loaded onto digital quote platforms.
Fleet TCO Elements Explained
Depreciation refers to the reduction in value lost over time as the asset gets older. Depreciation will be impacted by many factors such as the type of vehicle, resale market conditions and the level of use of the vehicle.
Funding or Finance Cost
Vehicles need to be purchased through use of cash or funded via a loan or lease. Cash will have an opportunity cost such as bank interest and loans/leases will have a funding or borrowing cost.
Vehicles need to be maintained throughout the usage period. Maintenance will vary according to how intensively the vehicle is being used and the associated manufacturer service schedules. Maintenance costs should cover all routine maintenance as well as forecast costs for tyres, glass and a degree of unplanned maintenance.
Fuel costs will vary significantly according to vehicle type, fuel type and operating cycle. Fuel is an important part of TCO calculations and should accurately reflect real world use, rather than manufacturer claimed fuel efficiency. This is particularly important when considering hybrid or plug-in hybrid electric vehicles as consumption will vary significantly according to operational cycle.
Vehicles incur a number of different taxes. All taxes which are directly attributable to the vehicle should be included within the TCO calculation and these will vary according to funding type and vehicle type.
Vehicle insurance should be included as part of a TCO calculation as long as it is incremental in nature. Some companies have group policies rather than policies which change when individual vehicles are added or removed from the fleet.
Costs associated with the administration of vehicles through manpower or systems costs.
At EVP Solutions we can help you formulate an effective policy based on fleet total cost of ownership criteria.
If you would like some assistance with your vehicle selections then please