Top Fleet Strategies that Will Save You Money
Fleet vehicles take a lot of wear and tear, and tend to be one of the biggest expenses in a business budget. Preventive fleet maintenance makes common sense, but just how much money does it save? GE Capital Fleet Services recently answered that question for its customers. In 2014, GE customers saw $210 million in actual savings and $420 million in potential, indirect savings. Working with Strategic Consulting Services Group, GE identified $1.6 billion in potential savings for fleet customers. What strategies contribute to such significant savings? Here’s what their research found.
Implement a Short-cycle Replacement Strategy
This refers to a strategy of trading vehicles at the optimum time instead of driving them longer. Your first inclination is probably, “Of course, GE wants customers to adopt a short-cycle replacement strategy. That means they sell more cars.” However, there are logical reasons why it makes sense. Each company will require a unique analysis based on factors like vehicle usage, company image, fuel consumption and insurance costs. Here are just a couple of factors contributing to the argument for short-cycle replacement.
- Depreciation is not the only factor to consider in a vehicle’s total cost of ownership (TCO), but it is a fleet’s highest expense. Vehicle depreciation is the sharpest in the first year of its life. However, depreciation levels out after that. As this chart illustrates, vehicles with mileage of about 15,000 miles per year depreciate around the same rate between years three and four. However, depreciation takes a sharp downward turn between years five and six.
- Maintenance costs is another big factor contributing to how often a fleet should be replaced. This chart shows a big jump in maintenance costs in year three, but then a decline in years four and five. However, by year six, maintenance costs are up, incurring nearly 44 percent of the car’s total maintenance costs for all the years.
A final chart in businessfleet.com’s analysis shows that total vehicle costs decreased by 16.9 percent between years three and four, then again in year five by another 4.1 percent. However, TCO increases by 37.2 percent in year six, making a good case for replacing vehicle fleets in year five.
Improve Management of Expenses
There are costs associated with fleet management that are seemingly out of the control of managers. Fuel, routine maintenance, and licensing and registrations fees are just a few. However, GE lists “properly managing time and expenses” as one of the factors that can contribute to billions in savings. How so? Let’s take fuel consumption as an example. How much can be saved by encouraging drivers to drive slower? Research from Consumer Reports found that increasing speed from 55 to 75 is equal to trading your compact car for a large SUV. Going from 55 to 65 decreased fuel economy by four to eight mpg. Going from 65 to 75 lowered it another five to seven mpg. Encourage employees to drive at moderate speeds. Some fleet managers are even using GPS devices that track speed. Lower speeds also contribute to fewer accidents and less risk for the company.
Another big way companies are improving their management of expenses is through vehicle management software. In fact, autos.com says this software is the “easiest way for you to keep track of the maintenance and servicing needs of your fleet.” Using software designed to track your fleet usage goes far beyond simply reminding you when to perform routine maintenance. Vehicle management software provides a window into your fleet vehicle. Reports reveal fuel usage, average speed, mileage and other features of driver behavior. In addition, all the data compiled in your software will help you make important decisions about your fleet, like when to repair and when to replace. Monitor depreciation, track expenses, schedule maintenance, review analytic data and track idle time in one convenient and mobile application.
Transition Reimbursement Programs
One more way GE says its customers are saving is by turning reimbursement programs into company vehicle programs. Implementing a fleet leasing program instead of an employee reimbursement program saves money in the long run for numerous reasons. One of the big ones is decreased liability. First, when the company is responsible for maintenance, it can ensure maintenance is performed in a timely manner, decreasing the chance of accident and injury that result from delayed safety maintenance. Secondly, when the vehicle belongs to the company, managers can rest assured that the proper insurance is carried. Few employees actually pay the additional fee to carry “business insurance,” which can result in inadequate coverage and more risk for the company.
Company vehicles also save money for the company because they are excellent recruitment and retention tools. A study from GE Capital Fleet Services found that people are more likely to apply to companies that provide vehicles and they are more likely to stay once they get the job. Sixty-four percent of company vehicle drivers said they were less likely to leave their job because of the fleet program. Whereas, 61 percent of those that are part of a reimbursement program said the vehicle program did not make them less likely to leave. Additionally, 42 percent of employees with company vehicles said they were very satisfied. But, only 18 percent of reimbursed employees were very satisfied.
There’s no doubt there are a lot of factors to consider when calculating fleet expenses and recommended maintenance. Effectively tracking all that data raises awareness and helps managers make informed decisions about the maintenance and replacement of their fleet. Let [company name] help you manage your fleet through its cloud-based software. We provide software solutions for all aspects of facilities maintenance. Contact us to learn more.