The Car and Truck Fleet and Leasing Management Magazine

Analyzing the Industry Trend to Extend Replacement Cycles: Part I

With budget constraints encouraging more fleets to be creative with their cost-cutting strategies, fleets in many business sectors are experimenting with extended cycling. Read on to find out the advantages and disadvantages.

May 2010, by White Paper

Rising costs and a sluggish economy have forced fleets to rethink their budgets as they attempt to do more with less. An increasing number of companies are looking to cut costs by extending vehicle replacement cycles so cash flow can be diverted toward other expenditures. Whether extended cycling pans out for a company depends on factors such as fleet utilization, operating costs, and the length to which they're extending cycles. If there is life left in the existing fleet with minimal impact to maintenance, keeping vehicles in service longer may be a good cost-saving strategy.

Fleets in most business sectors are experimenting with extended cycling. For example, service fleets, which often have higher cap costs due to upfitting, tend to keep their vehicles in service longer than other fleets. These fleets are accustomed to paying more maintenance expenses near the end of the vehicle life, stretching out the lifecycle by as much as 15,000 miles over recommended replacement parameters if they feel the strategy will pay off in the end. More and more sales fleets are willing to embrace this philosophy as well, extending lifecycles by several thousand miles in some cases.

Budget constraints have encouraged more fleets to be creative with cost-cutting strategies, and nothing is off the table. Some companies have adopted a wait-and-see strategy, perhaps skipping an ordering cycle as they anticipate the economy to pick up. Individual vehicles are replaced only when necessary, when safety concerns arise, for example. A related strategy is "right-sizing" the fleet, or reducing the number of excess vehicles. Some companies are streamlining their fleets either by having drivers share vehicles when appropriate, downsizing their workforce, or redefining employee job functions to eliminate a portion of the fleet.

The economic downturn precipitated the adoption of many cost-saving suggestions, including extending vehicle lifecycle when appropriate, that fleet management companies typically recommend to their clients. Sometimes extending vehicle lifecycle when appropriate is a smart way to save money and to get as much life out of fleet vehicles as possible.

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