The major long-term savings associated with updating your fleet can be tough to balance against the cost of new equipment. Knowing when to make the transition to new equipment is all about taking into account a variety of factors such as your current fleet age, maintenance costs, the availability and cost of new equipment - and finding a good balance between them all. Here’s a quick look at some of the factors you should consider, and how they might affect the decision to update your fleet.
Current Fleet Age & Maintenance Costs
Even as the strengthening economy keeps driving up demand for both new and used trucks, the average age of fleet vehicles continues to trend up, according to Gary Meteer, director of commercial vehicle solutions for IHS Automotive.
IHS also found that while the average age for Class 4-8 vehicles was 12.5 years in 2007, that figure in 2014 was 14.7 years. As fleets age, the equipment can become prohibitively expensive to maintain - past a certain point your ROI can actually go down as you sink money into keeping vehicles on the road.
Steve Jastrow, a strategic consulting manager for GE Capital Fleet Services, said knowing when it’s time for a new vehicle could help control those high costs. Making sure that you’re identifying the opportune time to be cycling vehicles is really important,” he told Fleet Owner. According to the latest quarterly Company Car Trends research from GE Capital Fleet Services, 48% of respondents listed whole life cost at the top of a list of essential factors when making fleet purchasing decisions. It’s essential that you track your maintenance costs over time so you can have a clear picture of what you might actually save by investing in new equipment.
Value & Cost of New Equipment
As advances in technology make trucks safer, more reliable, and fuel efficient their value increases, further offsetting the cost of upgrading your fleet. Replacing older, expensive to maintain trucks with new vehicles can improve the overall efficiency of your operation almost immediately.
Darry Stuart, president and CEO of Fleet Management Services, noted in an interview with Fleet Owner that while maintenance costs for older vehicles have generally remained stable over time, one area of particular growth has been “emissions and the engine areas.” Newer equipment also incorporates more safety features that can reduce crash cost and improve the bottom line significantly, somewhat reducing the need for expensive aftermarket safety features.
All these factors add up to an high value for new equipment that makes transitioning on a regular cycle a very attractive cost cutting measure that keeps resale value and efficiency high while smoothing spending out over time. Mercury Associates studies have found that “many organizations retain and operate vehicles far past their optimum economic life,” and that this can lead to “excessive maintenance costs” and ”increased fuel costs as the vehicles decrease in fuel economy.”
The incidental cost of new equipment (i.e. a down payment) can seem like a roadblock, but with good financing the transition can be accomplished at a relatively low-cost as compared to trying to keep your old fleet healthy.
According to Fleet Financials, industry leaders effectively “utilize economic-based replacement planning tools to empirically determine the proper lifecycles for vehicle replacement.” Make sure you stay on top of your own fleet’s financials and plans and make the change at the optimum time.