Fleet Maintenance - 44

MANAGEMENT

OWNERSHIP COSTS

OPERATING COSTS
DOWNTIME COSTS

Dreamstime

MAINTENANCE COSTS

How do you know when
to replace a vehicle?
Calculating the cost per mile
for the total vehicle lifecycle
can help determine optimal
vehicle replacement intervals.
At some point during the life of a truck, the
cost to keep it exceeds the cost of a new one.
While there are other good reasons to replace
a truck, the primary evaluation considerations
should be economics.
There are four economic aspects to consider
when evaluating the vehicle lifecycle. Before
we cover those items, we must first understand some underlying assumptions about
the equipment.

By Joel Levitt

PRESIDENT, SPRINGFIELD RESOURCES
Springfield Resources is a management consulting firm
that services a variety of clients on a wide range of maintenance issues. Levitt is the president of the company and
has trained more than 17,000 maintenance leaders from
more than 3,000 organizations in 38 countries. He is also
the creator of Laser-Focused Training, a flexible training
program that provides specific, targeted training on your
schedule, online for one to 250 people in maintenance
management, asset management, and reliability.

44 Fleet Maintenance | February 2020

The underlying assumptions

Before we can adequately analyze the economics and the cost components, it is important
to understand the following underlying
assumptions:
Measure value
What value does your equipment provide? The
lifecycle cost to replace a unit is always divided
by the value the unit offers. The most common
measures of value include mileage, hours of
operation, trips, or ton-miles.
Some examples include commercial carriers
who sell tons of a class of freight for a certain
number of miles. Taxi cabs sell by the trip,
plus the mileage and waiting time. Other
businesses are paid for by the trip, for just
being there (known as standby power). These
are all different methods for measuring the
value provided.
Projected life
Projected life looks at the average lifespan of
the entire fleet's vehicles or sets a target lifespan for the vehicles. For example, replacing
trucks when they reach 700,000 miles.
Suitability
Suitability, which can also be referred to
as comparability, includes capacity, agili-

ty, time-saving features, robustness, safety,
and availability.
In this article, assume the suitability of the
two units is the same, and just compare the old
unit to a potential replacement.
In today's rapidly changing technology environment, new units might have features that
make them much more suitable for your operation's use. For example, if you are scheduled
to replace some dry van trailers and you are
traditionally cube limited, a 53' trailer is more
suitable then a 40' trailer. A direct comparison
of the two trailers would have to take the higher capacity into account.
Sensitivity
Replacement models show sensitivity to
one or more inputs. Sensitive inputs include
interest rates, diesel prices, utilization, and
projected life.
ÜÜUsage (mileage or hours) - Higher estimates for usage will skew the results
toward lower operating cost units. Low
utilization estimates will skew away from
high fixed-cost units.
ÜÜInterest rates - High rates will favor lower
initial investment. In turn, this can lead to
higher operating and maintenance costs.
ÜÜFuel costs - High fuel costs favor high-efficiency and lighter-weight units. Lower fuel
costs encourage buying more horsepower.
For example, the price of diesel has been
stable around $3.25 per gallon in the U.S. But,
if we look at the last ten years diesel costs
have varied as high as $4.12 per gallon and as
low as $1.99 per gallon. Another example: The
interest rates over the previous few years have
ranged from 3.5 percent to 5.5 percent and
are trending lower as this is written. These
variations make modeling accuracy difficult.

Fleet Maintenance

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