March 2008, Automotive Fleet - Feature
Tire & PM Costs Increase Car Maintenance
By Mike Antich
Replacement Tire Costs Increase 4-7 Percent
One reason for increased tire expense is a series of price hikes throughout 2007 by tire manufacturers in reaction to the higher cost of oil, a key ingredient in manufacturing tires. In addition, there have been ongoing price increases for replacement tires by all manufacturers in the first quarter of the 2008 calendar year.
"The consumer retail tire price increases of 4-7 percent have included most of the national account tire programs," said Strom. "Several tire companies have announced even larger percentage increases for 2008."
Tires are usually one of the top three expense categories for car fleets. "Fleets are exploring possible actions to reduce their tire costs. Utilizing ‘house brand’ tires is one option. This can be an effective policy if the car is going to be replaced within 30,000-35,000 miles," said Lange.
Another option adopted as a tire policy is utilizing a more expensive premium replacement tire that has an expected longer tread life in an effort to prevent an additional set of tires. "An example would be a fleet with an 80,000-mile vehicle replacement policy," said Lange. "Knowing the premium replacement tire has a 50,000-mile tread life and tires are needed at 40,000 miles, it may make sense to replace the tires with premium tires versus utilizing a house brand tire, which may need to be replaced again prior to replacement of the vehicle."
Another factor leading to higher tire costs is the trend to larger 17- and 18-inch wheel sizes.
"The larger wheel sizes for cars are very common as an OEM standard, and coupled with oil prices, have contributed to the cost increases of replacement tires," said Strom. "There has been an increase in unique tire sizes developed by OEMs and their tire company partners. These new sizes are designed for the desired consumer ride handling, matched to the vehicle design — weight suspension and the price point. Many of these unique tire sizes have created challenges, as the replacement tire market may not be ready with production and inventory at several nationwide outlet chains."
However, an ongoing improvement in tire quality in the past decade has resulted in longer wear life, which has helped to offset price increases, said Strom. Tire life has been extended by 10 percent in the past 5-10 years.
Vehicle Quality Remains High
A key factor offsetting other maintenance cost increases has been the overall increase in vehicle quality. Vehicle quality for fleet cars continues to improve, which is substantiated by the OEMs reporting of fewer warranty claims. "We did not see any significant repair trends or service issues in 2007 across an OEM model line," said Lange. "Fleet managers in the past would hear field office complaints about a specific vehicle model issue, such as transmission, air conditioner compressor, or a steering component. But this wasn’t the case in 2007."
Strom agrees. "The vehicle quality performance should continue even as OEMs shorten new model introduction cycle time and cars become more complex with computer sensors and driver display alerts." Although vehicle quality has improved, Strom does not foresee fleet maintenance costs declining in future years. "There will be an increase in new technology, such as tire pressure monitoring systems (TPMS), navigation equipment, and increased electronics, which are expensive to replace should a failure occur," said Strom. However, an increasing number of nondealers now repair new technologies such as TPMS.
"Initially, most non-dealers did not have a lot of knowledge about TPMS and were directing issues to dealers," said Lange. "We’re seeing more nondealers repair the TPMS and they are more comfortable in the proper procedures to reset the system. The multiple TPMS manufacturers have added to the training delays for nondealers."
Strom agrees. "Much of the driver-focused technology such as navigation systems, satellite radio, audio component docking and wireless, SYNC, and others, are still fairly new and we have not seen any outside-of-warranty repair issues. Future challenges may be the availability of trained technicians to stay abreast of many more diagnostic codes, repair of these components, and the high repair costs."
Maintenance Costs for Hybrids
"The number of hybrids we lease to customers has doubled every year for the past three years," said Strom. "That said, hybrids comprise a relatively small percentage of the total vehicles we lease, but they are a share that’s growing very fast. Given the number of OEMs adding hybrids to their lineups, favorable residuals, increased availability, and an increasing number of companies focused on reducing fleet emissions, we think this trend will continue."
As hybrids log more miles with fleets, real-world data is now available regarding battery life and maintenance costs. "We have not seen any battery issues or data that suggests hybrids are more expensive to maintain than conventional vehicles," said Lange. Based on our experience, the only repair issue we’ve seen is the lack of nondealers comfortable working on these vehicles. These are solid vehicles now and will only improve as technology evolves."
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