The close of 2023 brought significant insights into the fleet management landscape, particularly regarding the total cost of ownership (TCO) for various vehicle categories. Vincentric's latest quarterly update provides a comprehensive analysis of how depreciation is increasingly influencing fleet costs, marking a pivotal trend as we venture into 2024. This blog post delves into these findings, highlighting key shifts in ownership costs and their implications for fleet managers.
1. Overview of Fleet Ownership Costs: The fourth quarter of 2023 saw ownership costs for the pickup category surpass the $.90-per-mile mark for the first time, before experiencing a slight decrease towards the year's end. In contrast, cars and SUVs displayed less volatility, maintaining a moderate rise over recent quarters. This nuanced behavior across vehicle categories underscores the evolving dynamics within fleet management expenses.
2. Vincentric's Cost Analysis Methodology: Vincentric's analysis, centered on vehicles driven 20,000 miles per year over a three-year span, incorporates eight standard cost elements: depreciation, financing, fees and taxes, fuel, insurance, maintenance, opportunity cost, and repairs. This holistic approach offers fleet managers a detailed perspective on the multifaceted nature of TCO.
3. Depreciation as a Key Cost Driver: The most notable takeaway from the fourth quarter is the significant role depreciation costs play in driving up fleet expenses. Depreciation costs rose by 6% to 7% on average compared to the previous quarter, primarily due to the influx of Model Year 24 (MY24) vehicles. This trend highlights the critical impact of vehicle age and model updates on fleet TCO.
4. Fuel Costs Offer a Silver Lining: Despite the uptick in depreciation costs, the quarter also saw a reduction in fuel expenses across all segments, dropping by 7% to 10% in comparison to the third quarter. This decrease in fuel costs provides a slight offset to the overall increase in fleet ownership expenses, offering some relief to fleet managers.
5. Fleet Cost Per Mile Increases: Across most vehicle categories, fleet costs per mile experienced slight increases, with luxury cars and SUVs leading the charge. Interestingly, passenger cars and pickups remained stable, indicating a sector-specific response to the broader economic and automotive trends affecting fleet management.
The fourth quarter of 2023 underscored the growing influence of depreciation on fleet TCO, alongside the complex interplay of factors that fleet managers must navigate. As the industry moves forward, understanding these trends and their drivers will be crucial for effective fleet management and strategic planning. With depreciation costs on the rise, fleet managers are tasked with seeking innovative solutions to optimize ownership costs while maintaining operational efficiency.
Navigating the complexities of fleet TCO requires a strategic partner attuned to the nuances of the fleet management landscape. Alliance Leasing is here to guide you through these challenges, offering tailored solutions that address the unique needs of your fleet. Contact us today to explore how we can help you manage depreciation costs and optimize your fleet's total cost of ownership in the ever-evolving automotive market.
