If you manage a commercial fleet of any size, it’s crucial to understand the costs and benefits of fleet vehicle replacement. Keep vehicles around too long and you start to run into increased maintenance costs and decreased performance. But if you replace them too soon, you may just be throwing money down the drain. Optimizing fleet vehicle replacement allows you to keep costs low, increase safety, and improve efficiency at the same time.
Leasing vs Buying
The first thing to consider when evaluating commercial vehicle replacement strategies is whether your company owns your fleet vehicles or not. Some fleets choose to purchase vehicles outright, while others choose to lease commercial fleet vehicles. Both practices have their associated benefits, and each will impact your fleet vehicle lifecycle.
If you lease fleet vehicles, you’re likely to have a set lifecycle of around 3-5 years built into your contract. This makes commercial vehicle replacement easier since you don’t have to worry about purchasing new vehicles or selling old ones.
For fleets who choose to own their vehicles outright, a longer cycle may make more sense. This is because you’ll have to factor in the cost of remarketing your old fleet vehicles as well as the cost of purchasing new ones.
Benefits of Forming a Vehicle Replacement Lifecycle Policy
The best option for fleet managers is to create a vehicle replacement lifecycle policy. With a solid plan in place, you’ll be able to easily evaluate when each vehicle in your fleet is ready for replacement. Putting such a plan into action takes the guesswork out of your vehicle replacement program.
Vehicles kept past their lifecycles are less efficient and incur greater fuel costs and maintenance costs. They also run an increased likelihood of breakdowns. When you replace fleet vehicles promptly, you can enjoy predictable resale values as well as minimized repair and maintenance costs. You also know what to expect in preventative maintenance costs, and can replace older vehicles before they experience costly breakdowns.
Replacing commercial trucks more often also leads to happier drivers. Commercial drivers appreciate a predictable vehicle replacement strategy, as it allows them to work with newer, more efficient, and more comfortable vehicles.
Timely vehicle replacement also leads to fuel savings and safety improvements. Newer vehicles are usually more fuel-efficient and offer more advanced safety technologies. Forward collision warning and automatic emergency braking are two such technologies. They both offer protection for your drivers and reduce your risk exposure. In the long run, you can significantly slash your fleet’s fuel and maintenance expenditures and keep drivers safe on the road by updating your vehicles at regular intervals.
Building a Fleet Vehicle Replacement Plan
Once you’ve decided to create a replacement plan, you may find yourself overwhelmed by the task. A general rule of thumb is for sedans to be cycled at 36 months or 75,000 miles, and light-duty trucks to be cycled at 48 months or 100,000 miles.
Establishing replacement cycles for medium-duty trucks, on the other hand, is both an art and science. It involves judgment, prediction, forecasts, and assumptions on one hand and analysis of available data on the other. You’ll want to replace older, higher-mileage units and then reinvest vehicle resale proceeds into newer units, of course, but at what point should you do so?
The answer to this question will be different for each fleet. Most importantly, you want to invest fleet dollars with the lowest total cost of ownership in mind. Here are three approaches you may use to determine when to replace vehicles.
- Conduct an economic lifecycle analysis. Use this to estimate the replacement point that results in the lowest total overall cost over the vehicle’s life. An economic lifecycle analysis can show you the total ownership and operating costs throughout a vehicle’s life. This allows a fleet manager to estimate the optimum point to replace the vehicle.
- Replace vehicles at an established age and/or mileage criteria. This is a common method used in many public and private fleet operations because of its simplicity. Choose a term such as eight years or 100,000 miles. As each truck nears your chosen term, you should be preparing to replace the vehicle. The downside to this is that the specific conditions of each vehicle are not taken into account, meaning some vehicles may be replaced sooner or later than their optimal time.
- Replace each vehicle when maintenance and repair costs exceed a threshold amount. This too is a simplified solution, and it does take individual vehicles’ conditions into account, but it requires a great deal more record-keeping than option number two.
No matter what method you choose to build a fleet vehicle replacement plan, you must have one in place. Even the most simplified plan is better than no plan at all. If you need help gathering data to decide on a plan, the best place to look is a telematics program. Contact Azuga today to schedule a demo and learn how our telematics devices can help.