Small changes add up when it comes to TCO
Imagine this: By making changes to small chunks of the pie chart that is your operating costs, you can uncover savings that add up big time. Of course, we all know this is completely possible, because the components that make up the total cost of ownership (TCO) of a vehicle ultimately affect each other. But just how much can you save from each of these categories?
My advice is that you reduce your TCO by selecting vehicles with the highest resale value, and the lowest fuel and maintenance costs. Then, it’s time to look at the other areas for possible cost-saving opportunities.
1. Maintenance & Repair
Costs here only make up 7-9% of TCO, BUT can have a measurable impact. Preventive maintenance is the key to savings in this category, because more often than not, spending some money on your vehicles now saves you a lot of money in the future. Create a preventive maintenance schedule to avoid expensive repairs later!
Depreciation accounts for 28-38% of the total cost of a vehicle — that’s a big chunk. To reduce TCO, evaluate your fleet to make sure you are using the right vehicle for the specific job application and replacing vehicles at the optimal time.
3. Fees, Taxes & Interest
Combined, these make up 4-6% of your TCO. Because these are smaller portions, you won’t get the “biggest bang for your buck” if you only focus on these areas.
Insurance is often left out of a vehicle’s cost calculation, but it accounts for 8-10% of your total cost. Even if it is handled by another department other than fleet, it is still an essential element of TCO.
5. Accident Expenses
These can account for 6-8% of a vehicle’s operating costs if an accident occurs. Reduce the risk and frequency of accidents by reviewing and updating your driver policy, and implementing safety programs, such as driver training.
This is another large portion of your pie. It can be 32-44% of a vehicle’s total cost. Reduce your fuel costs by utilizing a smaller engine when possible and cost-control measures that a managed program can provide.
Make sure to download our tip sheet on TCO to keep these categories front-and-center!