October 11, 2019
Expenses are a necessary part of any business. For any company that uses a commercial fleet to conduct its business, fleet expenses are unavoidable. This article will break down the expenses associated with owning a fleet, to give you the tools you need to estimate the cost of your own fleet. We’ll also help with some strategies for managing and reducing the expenses associated with a commercial fleet, so you can help keep your fleet expenses manageable.
Let’s start at the beginning. What, exactly, is a commercial fleet? According to Legal Beagle, “Commercial vehicles are those owned by a business and used for business purposes, such as carrying goods or paying passengers.” A commercial fleet is a group of these vehicles, employed by the same company.
So, all of the Amazon Prime delivery vans you see on the highway? They form a commercial fleet along with all of Amazon’s other motor vehicles. So do the trucks that deliver Walmart’s shipments from their warehouses to their stores. All of the trucks owned by your local HVAC repair company or any large pest control company are also commercial fleet vehicles.
The big-box trucks your local newspaper uses to drop large shipments at grocery stores are also commercial fleet vehicles. But the personally owned cars used by newspaper delivery people to make smaller deliveries? Those are not. Nor are the cars used by most pizza delivery drivers, with the exception of ones actually owned by the restaurant.
There are a number of factors and expenses related to owning a commercial fleet. While we’ll provide a broad overview here, there is no single price point for a commercial fleet. It’s important to break down the associated expenses, which will be different for every company. You’ll need to assess each of these items and how it will pertain to your particular fleet needs. Additionally, there may be other costs associated with your specific industry that will need to be taken into consideration.
Perhaps the most obvious cost associated with owning a fleet is the cost of buying or leasing vehicles. This will vary depending on the vehicles being purchased, their size capacity, any customizations needed for your industry, and the various functions to be performed.
You should also compare various vehicle options that might equally work for your business purposes. For instance, if you’re transporting goods, would it be better to purchase big rigs, box trucks, or cargo vans? Do you need refrigerated trucks or will standard ones do?
This expense should also factor in things like interest if you are using a loan to pay for your vehicles. It may go down for companies with larger fleets who can earn a discount for purchasing vehicles in bulk.
Maintenance is one of the bigger unexpected costs associated with owning a fleet. Not only do you have to buy the vehicles in your fleet, but you must also ensure that they remain in operational condition, withstand the wear and tear of constant use, and stay up to regulations. You’ll also need to factor in rising maintenance expenses throughout the lifetime of each vehicle since older vehicles require more maintenance.
Then you have the cost of fuel to keep your fleet running. Since the price of fuel can vary widely from year to year, this is a difficult expense to pin down long term. Fortunately, there are things you can do to ensure your fleet gets the best fuel efficiency possible to keep this cost under control.
Administration costs can include things like hiring a fleet manager, ensuring compliance with various regulations such as the ELD mandate, or paying fees for failure to comply. This category should also include costs for insurance, licensing, and registration in your area.
The good news is, some administrative costs can actually help you save money in other areas if managed well. In fact, good administration of your commercial fleet may just be the key to keeping costs down and profits up.
All of these costs add up quickly and can be a huge drain on your company’s budget. But the good news is that there are some things businesses can do to reduce the costs associated with their fleet. And they may be simpler and less expensive than you imagine.
Fuel is one of the largest costs associated with carrying out fleet operations. In fact, according to a survey by Teletrac Navman Research, it’s ranked #2 after payroll costs, at about 32% of a fleet’s budget. Additionally, cutting down on fuel costs can help you weather difficult times when gasoline prices are on the rise. And better fuel efficiency means a smaller carbon footprint for your brand too.
Keep fuel costs down by analyzing routes, cutting down on vehicle idling time, and keeping vehicles in good shape is a great way to reduce fleet expenses. While all of this might seem like a lot of data to track, a good fleet telematics program should make it simple and accurate.
Predictive maintenance involves keeping track of the condition of various parts of your vehicles to estimate when they will need servicing. By doing this, you can fix problems before they actually cause disruptions to your vehicle’s operations. Preventing vehicle issues before they happen means that predictive maintenance can keep vehicles on the road when they’re needed and can help your business to avoid serious damage and far more costly repairs that can result from break downs.
It’s no overstatement to say that a good fleet tracking system can be the key to keeping fleet operation costs low. Fleet tracking is necessary for companies to comply with regulations, take a serious look at their practices, find inefficiencies, and adopt strategies to fix them. Fleet tracking software can help you identify the pain points in your overall fleet expense, paving the way for you to devise strategies to reduce them. Additionally, fleet tracking can help you improve safety records, leading to fewer accidents and potentially lower insurance costs.
At the end of the day, the question isn’t if you can afford fleet tracking software. Can you really afford to operate a fleet without it? Still not sure? Our fleet tracking ROI calculator is a great way to see just how valuable this software can be for your fleet.