9 Questions to Ask When Determining Your Truck’s Lifecycle
Determining when exactly to cycle your vehicles is a fine balance among many factors, from acquisition, through operation, and resale or asset disposal. Examining your lifecycle practices is a proactive way to manage costs, because when you choose to cycle your vehicles impacts your bottom line. As with other fleet decisions, there is no one simple answer to this challenge. Vehicle model, upfitting, and use case are all going to impact your lifecycle strategy. Here are nine questions to answer when you’re deciding when and how to best cycle your trucks.
- Have I Accounted for Acquisition Cost?
One of the key aspects of a cost-effective lifecycle strategy begins with vehicle acquisition. Using data about vehicle model performance to conduct predictive analysis can help fleet managers identify which vehicles are the best fit for their drivers, for the application, and ultimately for resale. Taking this step to ensure the optimal vehicle models are used can greatly impact the lifecycle. There is also the simple factor of upfront investment: a larger investment of capital in a specialized, upfitted vehicle will require a longer lifecycle than a standard light or heavy-duty pickup.
- Should I Have a Short or Long Cycle?
When determining whether a shorter or a longer lifecycle is optimal, fleet managers should think about the trucks in use and how they are used to meet the needs of their company, customers, and drivers. In use cases where it is critical that trucks do not break down, such as fleets that deliver perishable goods or medical supplies, or fleets that operate in remote or harsh locations, a shorter lifecycle may be needed so the risk of breakdowns remains low. Fleets with a central location where pools of trucks are available can more easily call a replacement, so a longer lifecycle can be leveraged to minimize costs. Companies can also look at arrangements to re-purpose vehicles later in the lifecycle, such as utilizing older trucks for off-road projects to reduce impact on newer models.
There are benefits and drawbacks to cycling vehicles more quickly or retaining vehicles for longer periods of time. This graphic captures points to consider when finding the right balance for your fleet.
- How Much is Invested in Upfitting?
It is often not economically feasible to transfer upfit equipment to another vehicle when a vehicle needs to be replaced. In general, the higher the cost of the upfit, the longer a company should keep the vehicle on the road. While a customized upfit for a work truck may incur a higher initial investment of capital, it’s important to remember that having the proper equipment can reduce wear on a vehicle and make it more efficient to operate, resulting in an extended life and reduced maintenance costs.
- Am I Gauging by Mileage or Hours?
The answer to when to cycle trucks shouldn’t always be driven by mileage. Truck application and class of truck will impact how you measure both cycling and maintenance intervals. A class 8 truck that hauls freight can use mileage as a fairly accurate gauge of length of service. However, a bucket truck that drives short distances but operates all day should use engine hours of use rather than mileage as a gauge to account for impacts of all operations, not just driving.
- What is the Vehicle’s Task & Terrain?
Fleet managers must look at the vehicle task and operating environment to determine impact on the engine, tires, and parts. Factors like whether the truck operates in extreme heat or cold, or if it operates off-road will impact vehicle life and operating costs such as preventive maintenance intervals, tires, and axels. Examining these factors is also important to reducing total cost of ownership, because it helps you identify if you are properly matching vehicles to the location and application.
- Are There Opportunities for Greater Fuel Efficiency or a Different Fuel Type?
Vehicle fuel efficiency and fuel type also comes into play when you make cycling decisions. For example, if fuel prices in your region are on the rise, replacing vehicles with newer, more fuel-efficient models may make long-term sense for your bottom line. Fuel type should also be considered. Vehicles with diesel engines in general have a higher price tag, but their engines can last longer. As a result, fleet managers will often leave their diesel vehicles in service longer to get the most value out of the premium paid at purchase. Conversely, a fleet may find that they could meet their needs with gasoline-powered vehicles at a lower maintenance cost over the life of the vehicle and choose to cycle accordingly.
- Are Maintenance Costs or Downtime Impacting Overall Fleet Performance?
Some companies may take the view that a repair bill is cheaper than carrying a lease payment for a newer vehicle. However, there is ultimately a point in each vehicle’s life when non-preventive maintenance costs increase to the point where cycling in a new vehicle makes financial sense (in some cases, a vehicle can reach the point where a repair bill exceeds a vehicle’s value, effectively forcing the vehicle to be cycled).
There is also the impact of downtime while vehicles are being serviced. The severity of this impact is often determined by the use case. Downtime has significantly different impacts when it’s an HVAC driver who can easily be assigned a replacement van from a pool versus an oil field worker who is on a remote work site where replacements are not available. Avoiding downtime and significant maintenance costs can be achieved with an optimized lifecycle.
- Have I Accounted for Resale Value?
The moment a vehicle joins your fleet, depreciation begins – one of the biggest costs in running a fleet. The key to this is beginning with the end in mind: in other words, considering depreciation and the potential for remarketing when you first acquire or lease vehicles for your fleet.
Consultants can help fine-tune your lifecycle strategy by looking at what the vehicle is purchased for, the costs of operation, and auction data to help determine the optimal point where you have extracted the most value possible from your asset but still have enough value to sell for a reasonable price.
Whether or not a vehicle is upfitted and the type of upfit may also impact resale. If an upfit can easily be removed and transferred to another truck at a reasonable cost, this may make it easier to resell a vehicle than one that has a specialized upfit that cannot be removed.
- What Makes Sense for My Company’s Culture?
Finally, deciding when to cycle vehicles has intangible aspects that must be considered, namely driver satisfaction and overall company culture. Many times, companies choose specific models because their drivers value a vehicle that has more head room and shoulder space, or it’s important to the company to maintain a strong connection to a particular OEM. Other companies may consider Introducing newer vehicles as a worthwhile driver attraction and retention tool. If safety is a focus, your company may decide that introducing newer models with recent safety features like lane keeping assist or blind spot warning are worth the investment. These considerations are often just as critical to a fleet manager’s strategy as the dollars and cents.
by Lawrence Liu, Senior Strategic Consultant, Merchants Fleet
Originally posted on Work Truck Online
Source: https://www.automotive-fleet.com
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Graph 1: fleet management activities
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