If so, your memory needs a tune-up. It costs essentially the same today to operate a fleet as it did ten years ago. Peterson, Howell & Heather, the pioneer fleet management company, recently completed an in-depth study of the historic patterns of fleet costs. The PHH researchers measured today's costs against those of the last decade and then discounted the effects of inflation on all the expense categories. In "real" dollars, PHH says it costs companies a fraction of a percent more per month to run a fleet in 1975 than it would have cost to run the same fleet in 1965.
How so? After all, the cost of each vehicle has continued to go up every year by a healthy percentage. For example, a 1966 Chevrolet Bel Air sedan listed at $2550.05 and the corresponding 1976 Chevrolet Caprice commanded $3842.85. But in constant dollars, the cost of new vehicles purchased in 1975 was actually 17% lower than in 1965. And not because the new cars aren't as solid or as well-built as the older ones.
Compared to their ancestors, today's cars need a lot less maintenance, run longer, have fewer unscheduled repairs, are safer, more weatherproof and soundproof and emit less pollutants.
Because cars are more durable, they can stay in service longer. In 1951 the typical fleet car was in service an average of 12.9 months; in 1965 for 24.8 months; and in 1975 for 28.5 months. Since the depreciation rate is higher in the first year then in the succeeding years, the longer the car is in service, the lower the cost per mile for gross depreciation.
It's no secret that the gasoline bill for your fleet is approaching a king's ransom. But did you realize the per mile cost of motor oil is down? The owner's manual for a 1952 Chevrolet recommends an oil change after the first 500 miles and then at 2,000 mile intervals. In 1965 the schedule called for an oil change every 6,000 miles. And in 1975 Chevrolet recommended an oil change each 7,500 miles. Technological advances have provided us with more efficient and longer-lasting motor oils. Consequently, the dipstick reads "Add" less frequently than it did ten years ago. So, although the cost per quart has increased, oil consumption is down, and the resulting cost per mile is down.
Expense trends are interesting to study, but what is important is how they affect your particular fleet. How can you tell if decreases in one expense category are sufficient to offset increases in another? Do you know whether up-front investment in option al equipment will result in a sufficiently greater resale value? Is the extra expense of radial tires really worth it? Do you know which operating expenses you can really control? Do you feel confident enough, without professional advice, to pick a fleet of cars that in three years will retain its resale value? Can you be sure that the cars your drivers want are really what's best for your fleet? And finally, do you know the exact point at which the increased maintenance expense on a fleet car becomes greater than the depreciation expenses on a car to replace it?
PHH has an extensive data base that allows them to make definitive statements on these issues. Statements that are grounded in fact, not on intuition or whim.
Additional information on these expense trends and their impact on today's fleets will be available at the Peterson, Howell & Heather booth on the conference floor of the 20th Annual NAFA Conference in Pittsburgh.
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