The Car and Truck Fleet and Leasing Management Magazine

15 Trends That Will Impact Fleet Operating Costs in 2005 and Beyond

January 2005, by Mike Antich - Also by this author

1. Increase in Unscheduled Maintenance Due to Vehicle Under-Spec’ing.

A primary cause for unscheduled maintenance, especially for trucks and vans, is under-spec’ing. More fleets are investigating the use of smaller trucks to minimize acquisition costs. In an effort to reduce acquisition costs, some companies under-spec trucks but do not change the fleet application.

2. The Specter of Inflation.

One potential threat to future maintenance costs is inflation. At some point, we might see inflationary pressures on wages that potentially could affect maintenance costs. Already inflationary pressures are beginning to manifest themselves in the economy, such as higher fuel prices.

3. Ongoing Fuel Price Volatility.

The cost of fuel for the past 24 months has been erratic, and there are no signs this will end anytime soon. Fuel price volatility has caused overall fleet operating costs to increase in 2003 and 2004. However, if fuel expenses are not included, fleet operating costs have remained flat.

4. Use of Tier 2 and Tier 3 Fuel Vendors.

More fleets are mandating use of Tier 2 and Tier 3 vendors to lower fuel costs.

5. Inflationary Pressure on National Account Pricing.

A key reason for maintenance cost stability is that national account prices and labor rates have remained stable. A future concern is that inflationary pressures will cause labor rates to increase, especially in large metro markets.

6. Longer Service Lives for Fleet Vehicles.

Exerting upward pressure on fleet operating costs is the trend for companies to operate vehicles for longer service lives and to accumulate higher mileages. The risk to fleets is that almost 35 percent of the lifetime operating costs of a vehicle occurs in the 68,000-80,000-mile range. Within this mileage range, expenses for wear items such as brakes and transmissions increase two to six times.

7. Extending Oil Change Intervals.

Some fleets are extending oil change intervals as a cost-cutting measure. Also, more fleets are using a vehicle’s onboard oil life monitoring system to determine oil change intervals. There are reservations about driver over-reliance on oil life monitor systems and the possibility that drivers may not regularly perform other PM services.

8. Some Fleet Incentive Programs Offer Free Oil Changes.

Some rifle-shot fleet incentive programs offered by some manufacturers include free oil changes up to 36,000 miles or free tire rotations if the vehicle is brought to a dealership for service.

9. Extending PM Intervals for Medium-Duty Trucks.

There is a trend to extend PM intervals for medium-duty trucks. Although intervals have lengthened, the amount of PM work done at each interval has increased. Most medium-duty fleets have moved away from a three-level PM schedule – A, B, and C – and instead have adopted a two-level PM schedule called a B and C schedule.

10. Diagnostic Equipment Increases First-Repair Resolution.

Reduced cost of more sophisticated diagnostic equipment is helping control maintenance costs by increasing the instances of first-repair resolution, resulting in the use of fewer unnecessary parts to repair a vehicle.

11. Extended Warranties.

Extended warranty programs, such as DaimlerChrysler’s 7/70 extended powertrain warranty, help decrease the cost of unscheduled maintenance. Some fleets are buying extended warranties to budget maintenance expense.

12. Purchasing Off-Brand, Lower-Priced Replacement Tires.

In an effort to reduce costs, fleets are choosing lower-priced off-brand tires, resulting in a downward trend in tire costs. Firestone added a less expensive brand, Lemans, to its national account program while Goodyear recently added the Republic tire brand, which is also slightly less expensive.

13. Truck Tire Recapping Helps Reduce Operating Costs.

Tire recapping for medium-duty trucks has become an accepted industry practice. Tire recaps are less expensive than buying new replacement tires, and most tire casings can be recapped twice during their lifetime. Two other reasons for the increased use of recaps are the improved quality of today’s recaps and the prolif-eration of companies providing tire-capping programs.

14. Possible Increase in Tire Prices Due to Higher Cost of Oil.

Increases in oil prices could affect tire costs in the future. One offsetting factor about tires is that they are being built better and lasting longer. It is not uncommon for tires on intermediate sedans to go into the 45,000-mile range before needing replacement.

15. Improvement in Vehicle Quality.

Vehicle quality continues to keep maintenance costs stable even with an increase of monthly mileages. Over the past decade, improved vehicle quality has begun to decrease post-warranty recovery monies.

Let me know if there are other trends I might have missed.

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