Fleet management: Three key areas to reduce your TCO
January 16, 2025
Does the constant demand to do more with less within your fleet keep you up at night? If so, you’re not alone. Industry data tells us that 88% of fleet managers worry about increasing costs, highlighting the need for successful strategies to reduce your total cost of ownership (TCO).
As a fleet manager, you’re familiar with how complex fleet management costs can be. That’s why we recommend starting with the core items. Our real-world experience shows that 80% of fleet expenses are due to depreciation, fuel, and maintenance costs. Targeting these areas right away will help you see meaningful cost savings sooner.
Explore strategies in three key areas to stay ahead of the curve when it comes to your fleet lifecycle management.
- Net depreciation
There’s no getting around the fact that net depreciation plays a big role in the TCO for fleets. With the right strategies, you can reduce this impact and save money. Here’s why net depreciation matters and how you can manage it better.- Resale value: Vehicles are depreciating assets, yet some hold their value better than others depending on the make and model. Managing your replacement and depreciation structure to match the declining fair market value (FMV) of a vehicle can prevent significant losses when sold or replaced.
- Lifecycle timing: Mismanagement in vehicle lifecycle timing can result in higher depreciation costs. If vehicles are kept in service beyond their optimal lifecycle or replaced too early, it can lead to unplanned expenses.
- Maintenance and repairs: Insufficient maintenance and neglected repairs can accelerate the depreciation of fleet vehicles. When vehicles deteriorate due to inadequate care or delayed repairs, their value declines at a faster rate.
Strategies to manage net depreciation
- Optimal vehicle lifecycle management: Managing the lifecycle of your vehicles effectively ensures that your fleet operates at peak performance while minimizing costs. It helps reduce downtime, improve efficiency, and extend the usable life of your fleet.
Assess when to acquire, maintain, and retire vehicles to get the best value and reliability out of your investments. - Select the right vehicles: Choosing the right vehicles for your fleet is critical to meeting operational needs and optimizing performance. Vehicles that are well-suited for their intended purpose reduce wear and tear, increase longevity, and enhance productivity.
Analyze your business requirements, such as cargo capacity, fuel efficiency, and specific features, to ensure the vehicles align with your goals. - Regular fleet maintenance and care: Consistent maintenance is essential for keeping your vehicles in top condition. A proactive maintenance schedule minimizes breakdowns, extends vehicle lifespan, and ensures safety for drivers and cargo. Investing in regular care ultimately saves money and keeps your fleet running smoothly.
Stay on top of routine inspections, timely servicing, and addressing minor issues before they become major problems.
- Fuel efficiency
Rising and unpredictable fuel prices pose a serious challenge to fleet managers who need to reduce their fleet’s TCO. Fuel costs have been steadily increasing, with prices often fluctuating due to global supply chain issues, geopolitical tensions, and market demand. These changes can make it difficult for businesses to manage budgets and maintain profitability.
Another factor lies in the variability in fuel efficiency across a diverse fleet. Managing a fleet with vehicles of varying ages, fuel efficiencies, and maintenance histories can lead to inconsistent fuel consumption. Older vehicles or poorly maintained ones may use significantly more fuel, increasing overall costs and reducing environmental efficiency.
Strategies to reduce fuel costs- Fleet fuel policy: Implementing a comprehensive fuel policy can help standardize practices across the fleet. This might include guidelines for the use of fuel cards, restrictions on purchasing premium fuels, and setting clear expectations for fuel-efficient driving. A well-enforced policy ensures accountability and helps track fuel expenses more effectively.
- Driver behavior training: Implementing fuel-efficient habits, such as avoiding excessive idling, maintaining steady speeds, and reducing harsh braking or acceleration, can significantly cut fuel consumption. Driver training programs can be supplemented with telematics systems to monitor and provide feedback on driving behavior.
- Upgrade to fuel-efficient or alternative fuel vehicles: Replacing older vehicles with modern, fuel-efficient models or transitioning to electric or hybrid vehicles can lead to long-term savings. Alternative fuel options, such as compressed natural gas (CNG) or biodiesel, can also help lower costs while reducing environmental impact. Investing in a greener fleet is not only cost-effective but also aligns with sustainability goals.
- Proactive maintenance
Unplanned breakdowns and maintenance issues can be a nightmare for any fleet, leading to expensive repairs and unexpected downtime. It can disrupt operations at the worst possible time.
Without a structured maintenance schedule, things can quickly spiral out of control. Regular upkeep often gets overlooked, and before you know it, small issues snowball into costly problems.
There are some simple but important steps you can take to lower the chances you are seriously affected by unplanned vehicle downtime.
Strategies to lower maintenance costs- Implement preventive maintenance programs: Think of preventive maintenance as a little extra care to save big in the long run. By scheduling regular checkups for your vehicles, you can catch and fix minor issues before they grow into major (and costly) breakdowns. Prevention truly is better than cure when it comes to keeping your fleet running smoothly.
- Monitor vehicle health with telematics: Telematics technology is like having a health tracker for your vehicles. It provides real-time data about engine performance, mileage, fuel efficiency, and more. This means you can address potential issues early and keep your fleet in top shape while avoiding sudden surprises.
- Optimize parts procurement: Why pay more or wait longer than necessary for parts? Streamlining your parts procurement process ensures you’re getting the right components at the right price, quickly. This not only reduces costs but also minimizes repair times, getting your vehicles back on the road faster.
Embrace action: Download the TCO booklet now
Deepen your understanding of fleet cost management and unlock more insights by downloading our in-depth TCO booklet today. Discover the latest analyses of cost categories, effective strategies to influence vital fleet costs, and updates on current cost trends. By adopting these cost strategies, you'll transform your fleet's TCO, profoundly impacting your company's bottom line for the short term and long run.
