Constructor - July/August 2013 - (Page 91)
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
Table of Contents for the Digital Edition of Constructor - July/August 2013
Innovative Ideas Modernize 78-Year-Old Bridge
DeConstructing Social Media
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
Going Interstate? Go NASCLA.
Do the Math
Legislative and Regulatory News
2013 Regional Resource Guide
Member and Chapter News
Index to Advertisers
Constructor - July/August 2013