Managing Fleet Vehicle Costs in the Face of Rising Acquisition and Repair Expenses

Jonathon Spitz
September 6, 2023
Fleet vehicle owners are grappling with escalating acquisition and repair costs, impacting the industry. In the current landscape, characterized by a convergence of factors, understanding the challenges and adapting strategies is imperative for business owners as well as non-profits with fleet vehicles.

1. Rising Acquisition Costs:

  • You’ve heard that new vehicle prices are on the rise due to factors like inflation, supply chain disruptions, and advanced technology integration.
  • This impacts fleets specifically by:
    • Pent-up demand from fleet buyers exceeds the manufacturer’s availability to build them.
    • Instead, production is centered around vehicles with more bells and whistles, which fleets do not require, and cost considerably more than a fleet-configured work truck.
    • Availability has improved, but not enough to move the needle.
    • There is a shortage of compact cargo vans as OEMs have decided to exit this market segment entirely, increasing demand for larger vans and small pickup trucks.

2. Elevated Repair Expenses:

  • Complex vehicle technologies demanding specialized repairs and components.
  • Repair costs have surged by up to 20% over the last year due to intricate vehicle technologies requiring specialized repairs and components.
  • Shortage of skilled technicians has resulted in labor costs spiking by approximately 15%.
  • Spare parts and components have seen price hikes of around 10% due to ongoing supply chain challenges.

3. Impact on Fleet Management:

  • Financial strain on businesses as acquisition and repair budgets escalate.
  • Maintenance expenses becoming a significant portion of overall fleet costs.
  • Organizations are strapped and don’t have human resources to manage their fleet effectively at the present time.

4. Strategies for Mitigation:   

     1. Prioritize Preventive Maintenance:

  • Regular upkeep to identify issues early and prevent major breakdownsRegular upkeep to identify issues early and prevent major breakdowns.
  • Reduces long-term repair costs and vehicle downtime.

     2. Embrace Technology:

  • Utilize fleet management software for efficient maintenance scheduling.
  • Access data for predictive maintenance and optimal vehicle utilization.

    3. Diversify Vehicle Portfolio:

  • Explore alternatives to popular models facing high demand and cost.
  • Consider hybrid or electric options for potential long-term savings.

    4. Technician Training and Retention:

  • Invest in training programs to enhance technician skills.
  • Maintain a skilled workforce to tackle complex repairs effectively.
     
    5. Supplier Relationships:

  • Develop strong partnerships with parts suppliers for cost-effective sourcing.
  • Bulk purchasing and negotiated contracts can lead to better pricing.
     
    6. Evaluate Total Cost of Ownership (TCO):
  • Look beyond upfront costs to calculate long-term expenses.
  • TCO analysis aids informed decision-making during vehicle acquisition.
  • Here's why TCO matters to business owners:
    • Cost Visibility: TCO provides a comprehensive view of all the costs involved, helping you avoid surprises down the road. It helps you understand how much the vehicle will truly cost you over its useful life.
    • Informed Decision-Making: When you only focus on upfront costs, you might opt for a cheaper vehicle, but it could end up costing you more in the long run due to higher maintenance or fuel expenses. TCO analysis guides you in making more informed decisions that align with your budget and long-term goals.
    • Budget Planning: TCO allows you to plan your budget accurately. By accounting for ongoing expenses, you can allocate funds more effectively and avoid financial strain caused by unexpected costs.
    • Efficiency Consideration: A vehicle with a lower purchase price might have higher fuel consumption or require frequent repairs, impacting your operational efficiency. TCO helps you assess the overall efficiency and productivity of your fleet.
    • Resale Value: TCO considers depreciation, which is an essential factor when you eventually decide to sell or replace the vehicle. A vehicle with a lower depreciation rate might offer better resale value.
    • Comparative Analysis: TCO enables you to compare different vehicle options more holistically. Even if one vehicle has a higher upfront cost, it could prove to be more cost-effective over time due to lower maintenance and operational expenses.

5. Future Outlook:

  • Collaboration between industry stakeholders to address challenges.
  • Innovation in vehicle manufacturing and repair processes may influence cost trends.
In conclusion, fleet vehicle owners must navigate the surge in acquisition and repair costs by implementing proactive maintenance strategies, leveraging technology, diversifying vehicle choices, and fostering strong industry partnerships. These steps can help mitigate the financial impact and ensure sustainable fleet management in the face of ongoing challenges.

 

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