5 Things Every Business Should Know Before They Buy or Lease Their Vehicles. Please fill out the form to download the PDF.
The two biggest costs a fleet will incur are depreciation and fuel. Depreciation is a fixed cost that starts from the moment the vehicle is acquired. Minimizing the initial cost of a vehicle is a factor, but monitoring the depreciation, fuel, and maintenance for each vehicle has become increasingly important.
The original cost should not be ignored. Getting vehicles factory ordered can save money with volume price discounts: buying multiple vehicles at one time. Not to mention, the possibility of a competitive assistance program (CAP) that can be explored with Ford, GM, and other major manufacturers.
As stated previously, the resale value of the vehicle plays a pivotal role in depreciation. Typically replacing a vehicle when variable costs are low and resale value is high will minimize depreciation. For instance, if a 2019 model year vehicle is going to need to be replaced and its early April, it is better to wait until the new model year can be ordered, usually in the August to September timeframe.
Business owners may see frequent vehicle replacement as unnecessary and will retain vehicles for longer periods of time, but studies have shown that holding on to vehicles past their optimum economic life, can result in excessive maintenance costs, and decreased fuel economy.
Understand that the lowest priced vehicle does not necessarily mitigate depreciation. For instance, take a light duty truck vs. a subcompact sedan, the truck may depreciate less and retain more value when it’s time to resell. The truck is a better option if you are looking at depreciation alone.
Managing fuel can be a bit trickier since its harder to control the price of fuel. However, there are tools available such as a fuel program or a telematics program which monitors idling, harsh braking, and other poor driving habits. Older vehicles tend to get worse MPG, so keep a close eye to see if a vehicle is costing too much in fuel.
Leasing Associates has helped many companies put processes in place to help monitor not only fuel and depreciation, but a myriad of other fleet specific initiatives.