Constructor - July/August 2013 - (Page 91)

Do the Math OLDER VEHICLES COST MORE THAN YOU THINK BY DAVE SHOOP ENTERPRISE FLEET MANAGEMENT THE MOST COMMON REASON COMPANIES USE to justify a “buy and hold’ replacement strategy is that maintenance costs do not justify the expense of a new vehicle. While there’s no doubt that vehicle engines and transmissions are designed to last much longer than ever before, there are a number of other factors that have to be considered. By working with a professional fleet management company on a true holding cost, analysis all of the vehicle expenses can be taken into account. Once you see the numbers, you may be shocked to realize the hidden expenses in a traditional “buy and hold” strategy. Holding costs are determined by calculating costs over the life of a vehicle for depreciation and taxes, downtime and administration, maintenance, insurance and fuel. Most companies make the mistake of placing a priority on depreciation when it only accounts for 18.4 percent of the cost of running the vehicle. Many would be surprised to know that 52 percent is fuel, but few are managing fuel expenses beyond ensuring all fuel charges fall within company guidelines. There are two factors at work in managing fuel expense. First, the price at the pump has increased nearly 12 percent each year from 2005 to 2012. In addition, buying fuel for an older vehicle can be like throwing good money out the window. For example, based on a pump price of $3.85/gallon, an older vehicle that is only two miles per gallon less fuel efficient than it used to be will require more than $1,350/year in additional fuel to travel the same 25,000 miles as its late model counterpart. New vehicles also get significantly better mileage than a vehicle that is now six to eight years old got when it was purchased, adding to the additional fuel expense. The higher the price at the pump, the more money is lost. Maintenance expenses also are higher for older vehicles, but not in the way you may think. As the vehicles start to age, maintenance expenses can mount quickly. This is especially true in years four, five and beyond when the frequency of small expenses begin to accumulate and the manufacturer’s warranty expires. Once the cycle begins, a single repair can cost as much as $600 to $900, and maintenance expenses are never ending. An older vehicle not only becomes a constant drain on expenses, it also contributes to a loss of productivity due to increased downtime. For those who believe it is more cost effective to spend up to $5,000/year in additional expenses for maintenance and fuel on an older vehicle rather than buying a new vehicle, the numbers for overall costs tell a far different story. Each business is unique, and there is no universal approach to developing a replacement cycle for a fleet of vehicles. To ensure that vehicles are replaced at appropriate intervals for optimum performance and resale value, a comprehensive cost and replacement analysis will demonstrate conclusively how older vehicles can cost a business a lot more than they’re worth. Dave Shoop is assistant vice president, Enterprise Fleet Management. He can be reached at (314) 512-2795 or david.g.shoop@efleets.com. Enterprise Fleet Management, a full-service fleet management company for businesses with mid-size fleets, is an affiliate of Enterprise Holdings Inc. With 58 fully staffed offices nationwide, it supplies most makes and models of cars, light and medium duty trucks and service vehicles to businesses across the United States. For more information, visit the company’s website at www.efleets.com or call toll free 1-877-23-FLEET. ◆ Be sure to read Constructor’s May/June article on weighing your equipment options in a constantly changing market: http://bit.ly/10v1cih. J U L Y / A U G U S T 2 0 1 3 | www.constructormagazine.com 91 http://www.efleets.com http://www.bit.ly/10v1cih http://www.constructormagazine.com

Table of Contents for the Digital Edition of Constructor - July/August 2013

Editor's Note
President's Message
CEO's Letter
Hire Power
Innovative Ideas Modernize 78-Year-Old Bridge
DeConstructing Social Media
Business Fraud
Challenge Accepted
Stand-Out Safety Program Earns Opp Construction Grand Award
2013 AGC/Willis Construction Safety Excellence Award Winners
2013 Liberty Mutual Marvin M. Black Excellence in Partnering Awards
Money Isn't Everything
AGC in Action
Wall of Wind
Weathering the Storm
Green, Safe and Fast
Leading the Way
Summing it Up
Tall Orders
Going Interstate? Go NASCLA.
Do the Math
Technology Toolbox
Technology Toolbox
Bond-Readiness Program
Legislative and Regulatory News
Book Review
Upcoming Events
2013 Regional Resource Guide
Member and Chapter News
Index to Advertisers
Final Inspection

Constructor - July/August 2013

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