There has been an ongoing trend toward flat maintenance costs for the past three years. A number of fleets replaced vehicles early to take advantage of the strong resale market in the 2010 calendar-year, which helped keep a lid on preventive maintenance costs for CY-2011, as the average age of fleet vehicles in operation decreased with an increased number of older units taken out of service.
“Overall, fleet car maintenance costs decreased slightly compared to 2010 calendar-year. In 2010, a strong resale market drove replacement orders, which helped prevent maintenance costs from rising during 2011,” said Eric Strom, maintenance & safety product manager for GE Capital Fleet Services.
However, the average cost of tires and oil change transactions increased in 2011, but were offset by the decrease in the average cost for repairs. “In 2011, overall spend declined 4 percent on a cost-per-vehicle-per-month basis and 6 percent from a cost-per-mile standpoint,” said Strom. “The fleet portfolio data showed several other indicators influenced by the shift to more frequent vehicle cycling as there was a decrease in the average odometer reading and months in service.”
These were some key findings of the 17th annual fleet passenger car maintenance study conducted by GE Capital Fleet Services, a fleet management company headquartered in Eden Prairie, Minn. The study is based on actual maintenance expenses incurred by 13,318 passenger cars from Jan. 1 to Dec. 31, 2011.
Oil Change Expenses Raise PM Costs
One area in which fleet operating costs increased was preventive maintenance.
“Preventive maintenance costs increased in 2011 as the average cost per individual oil change service rose 6 percent, or $2,” said Strom. “However, costs were flat on an average cost-per-mile and cost-per-month basis as the OEM policies for extending oil change intervals are favorably impacting costs.”
Automakers are switching to new engine motor oils for improved fuel efficiency and engine protection. General Motors’ cars and trucks are being built to use Dexos oil. Other OEMs, such as Ford, are also beginning the switch to the GF-5 oil standard.
“The new motor oil specifications are designed to improve engine life and performance and enhance fuel efficiency,” said Strom.
The new oils have been touted by the oil industry as having superior protection properties, which will allow increased mileage intervals between recommended oil changes. This was borne out in data collected by GE Capital Fleet Services. “Between 2010 and 2011, the average months between an oil change shifted from 3.2 months to 3.5 months and the average miles interval went from 6,312 miles to 7,026 miles,” said Strom.
However, unintended consequences have resulted from switching to new motor oils.
“These new oils, such as GM’s Dexos and the industry grading of GF-5, can be confusing and repair providers need to ensure the correct oil specification is matched to the vehicle year-make-model,” said Strom. “We have seen some providers moving away from stocking conventional oil and carrying semi- and full-synthetic oils only to simplify inventories and reduce the complexities of oil choices.”
Although the new motor oils are more expensive, these costs, so far, are not being passed on to fleet customers.
“Many repair providers are menu pricing the service and not charging a bottle upcharge despite the additional cost of these new oil specifications. Individual oil change costs requiring the new oil specifications are stabilizing at the national account providers and are often packaged with other commonly required OEM services, such as tire rotation and brake inspection,” said Strom.
Another factor cited by Strom that is contributing to extended oil drain intervals is the increased prevalence of onboard oil change monitoring systems on a growing number of new models. “More fleets with passenger and light trucks are adopting the oil change monitoring systems to take advantage of the extended oil drain intervals,” added Strom.
However, the forecast for the 2012 calendar-year is for oil change costs to increase.
“Oil change costs on a per-transaction basis will increase, even with repair provider pricing specials, but, overall costs per mile will remain flat as the average mileage interval is extended between oil changes,” said Strom.
An ongoing trend has been for franchised dealers to enter the fleet “quick lane” oil change market. “Many OEM dealerships have developed express lanes to gain more service business. Chrysler Group dealerships are expanding Mopar Express Lane services beyond the 600 dealers currently offering this service, which includes oil changes and preventive maintenance checks,” said Strom.
According to Jeff Levin, Mopar regional fleet service manager, Chrysler plans to offer Saturday service hours at 80 percent of its dealers by the end of the 2012 calendar-year, plus offer one-stop service for customers who have competitive makes.
[PAGEBREAK]Replacement Tire Cost Trends
Despite much higher retail tire prices, tire pricing for fleets have risen at a lower rate because of pre-existing fleet account pricing agreements.
“In the 2011 calendar-year, average tire costs decreased slightly on a per-month and per-mile basis driven by 2010 vehicle replacement. This is good news for fleet’s overall tire expenses,” said Strom.
One reason for the price hikes for replacement tires is due to increases in the cost of raw materials, especially the high cost of oil, a primary ingredient used in manufacturing tires. In addition, the world’s rubber supply is more constrained due to increased global demand, which is putting upward pressure on prices.
“As expected, costs increased 5 percent on a per-tire basis as tire companies passed along some of the higher costs of raw materials. Goodyear, as an example, experienced a raw material increase of about 30 percent in 2011 compared to 2010,” said Tim Waldschmidt, national fleet manager, national accounts for Goodyear Tire & Rubber.
A similar assessment of the replacement tire market was offered by Lynn Stoudenmire, commercial sales manager for Michelin North America. “The escalation in material costs is largely driven by rapidly growing worldwide demand for these raw materials,” said Stoudenmire. “Key raw materials, such as natural and synthetic rubber, rose to historic highs during 2011.”
Another variable increasing tire prices is larger wheel size diameters. Automotive OEMs continue to increase the size of tires on new-model vehicles, which has resulted in higher replacement tire costs. The larger the tire, the more material it takes to produce the tire, which, consequently, increases the cost of the replacement tires. Larger diameter tires can add $100 to $200 in additional expense per set of tires. From a vehicle selector standpoint, the costs for replacement tires can vary as much as 30 percent or more for different tire sizes on the same vehicle.
“Vehicle tire size changes continued in 2011 as new vehicles with larger wheel diameters and unique tread designs increased costs,” said Strom. “According to the Tire & Rim Association, there were 111 recognized auto radial tire sizes in 1990 and that number grew to 328 in 2010. Of those, the majority of fitments 20 years ago were 13-15 inch wheel diameters, and in 2010 the popular sizes were 15-20 inch diameters.”
The diversity of tire sizes impacts replacement tire supplies for one to two years, as other aftermarket tire companies may not immediately meet the demand for these tire sizes. This lag time limits selection and availability of replacement tires. Some fleets experienced shortages of certain replacement tires as the result of unique tire sizes or tire load capabilities being introduced on new model vehicles.
“As a vehicle ages and the replacement market demand grows, other tire manufacturers will typically add these sizes to their own lines,” said Stoudenmire. “It can take up to three years for an adequate replacement market to emerge. This type of situation will likely continue in the future, as vehicle manufacturers strive to offer technologically advanced vehicles that require new tire specifications to achieve their optimum performance.”
One trend in national account tire programs, which is noteworthy and influencing fleet tire expenses, is the decrease in availability of house-brand tires.
“The availability of national provider ‘house brands,’ or the third or fourth tier of tires, has decreased as they simplify their production and replacement tire selections,” said Strom.
Another emerging trend is consideration to buy lower rolling resistance tires as a means to increase vehicle fuel economy.
“The lower rolling resistance fuel economy tires have become more popular with very good availability. However, some fleets believe the price premium will not offset the fuel savings,” said Strom.
There are tire company options, such as Goodyear’s Assurance Fuel Max tire, which enhances fuel savings and is a mid-tier priced tire. According to Waldschmidt of Goodyear, “Potential fuel savings could be 100 gallons of fuel or up to $350 over the life of the set of tires.”
Michelin has also developed advanced tire technology that reduces the rolling resistance of tires. Stoudenmire concurred that lower rolling resistance tires contribute to meaningful reductions in fuel consumption. “Depending on the vehicle and application, reductions of 1 to 2 percent in fuel consumption are possible by running selected Michelin Brand tires,” said Stoudenmire.
A vehicle alignment may also increase the tread life of a tire and reduce fuel cost per mile. Sears Auto Centers partnered with Hunter Engineering to become the exclusive provider of new alignment equipment that can perform a free alignment check in about 90 seconds, according to John Romano, national account manager for the Sears Auto Center. “This has delivered improved service quality and speed and helped spot alignment issues early on,” added Romano.
Another factor influencing fleet tire expenses is greater demand for snow tires in passenger cars. “This has presented a challenge for fleet managers as some cars come equipped with summer tire tread design when delivered. This can increase costs when fleet drivers express concern about winter driving and request new tires,” said Strom. “A special note for vehicles with passenger snow tires is that some industry experts state that the recommended tread depth replacement guideline is 6/32nds or less versus 2/32nds-3/32nds for other passenger tires.”
This was seconded by Bill Waltzek, fleet account executive for Bridgestone-Firestone.
“If snow is a factor, we recommend replacing tires at 6/32nds. In snowy conditions, the more tread you have, the better. With more tread, there is more room for the snow to compress in the grooves and get pushed out as the tire spins which helps keep the grip to the road. The less tread available, the less snow can be picked up which decreases traction immensely,” said Waltzek. “Typically, you will find that designated winter tires actually have their first wear bars at 6/32nds of tread and second wear bars at 2/32nds. Some snow tires actually have the wear bars at 5/32nds, so it depends on where the first wear bar is.”
Replacement tire prices are forecasted to continue increasing for the 2012 calendar-year.
“During 2012, we expect replacement passenger tire costs will continue to increase with several likely price adjustments from tire companies. Raw materials and oil costs will be the key tire production cost levers,” said Strom of GE Capital Fleet Services.
Scheduled Maintenance Programs
A survey of OEMs shows no significant changes to scheduled maintenance programs for 2012-model cars and early release 2013 models. “However, we expect fleets to have a higher percentage of passenger vehicles that will have the new oil specification requirements,” added Strom.
One factor that will drive up future maintenance costs is the ongoing increase in hourly labor rates, as seen over the past three years.
“We have seen repair shop billed labor rates increase in 2011 and expect to see the same in 2012. Several of the national brand providers made slight adjustments to their zone labor rates in 2011,” said Strom.
This is substantiated by the Consumer Price Index for “motor vehicle maintenance and repairs,” which rose 2.3 percent, and, for “motor vehicle parts and equipment,” which rose 5.5 percent for the time period October 2010 to November 2011.
Increased Vehicle Quality Offsets Labor Cost Increases
Vehicle quality continues to improve with each succeeding model-year.
“The OEMs are improving vehicle quality, which means fewer warranty claims,” said Strom. “This has helped offset some of the increasing labor and parts costs.”
However, there continues to be an ongoing parts shortage, resulting in delayed deliveries, extending vehicle downtime.
“There have been challenges in obtaining newer vehicle replacement parts in a timely manner and minimizing the vehicle downtime and rental costs,” said Strom. “When faced with these repair delays, it’s important to engage the repair provider to discover the part’s order priority status and escalate to the store parts manager and/or OEM service/parts representative early on if needed.”
In recent years, there have been concerns about the proliferation of onboard new technologies, such as in-dash GPS, sensors, infotainment systems, etc., on vehicles and the potential impact on future maintenance expenses.
“The infotainment and in-dash technologies have not led to additional passenger car repair costs. There have been isolated fleet driver concerns on use of the technology and making device connections and who pays for the onboard/satellite subscription services — a question fleets may later face if a non-standard selector vehicle equipped with this technology is purchased out-of-stock,” said Strom.
One area where new technology may impact maintenance costs is windshield repair.
“Windshield costs could increase for some vehicle models equipped with heater decals for rain sensors, auto high beam control, and other technology. This is another example of creative safety technology that improves the driving experience, yet may lead to higher component replacement costs,” said Strom.
2012 Maintenance Trends
Going forward into 2012 and beyond, Strom said fleets delaying vehicle replacement cycling will likely see a 10-percent or higher increase in monthly per-vehicle maintenance repair costs, citing brake repairs as the “largest expense incurred beyond normal vehicle replacement parameters for the passenger car fleets” in the 2011 study.
Another impact on future maintenance costs is the anticipated increase of hybrids and electric vehicles in future years.
“We expect to see more hybrids and electric vehicles hit the road and many non-OEM providers have been preparing their technicians with training initiatives,” Strom said.
“Firestone began its corporate hybrid national training initiatives for basic maintenance and repair services in 2008,” said Waltzek of Bridgestone-Firestone. He explained that store hybrid certification includes 100-percent teammate completion of the “Introduction to Hybrids” course and a minimum of two teammates completing additional hybrid training.
“We also launched a nationwide rollout training on alignment services and technologies such as stability controls and driver alert systems. We have also seen improved speed of repair with recent investments in new diagnostic equipment and training,” said Waltzek.
Five Tips for Fleet Managers
OEM oil change schedules: Consider adopting these if your fleet profile and driving characteristics are “normal” driving conditions.
Tires: When building new vehicle selectors, inquire about the potential wheel diameters/tire sizes; and whether Snow Belt-based vehicles may be delivered with summer tread designs.
Repairs: Leverage the OEM new-car warranty coverage. Communicate to company car drivers that their company ultimately pays for all repairs.
Windshields: Glass repairs may be possible if the crack is smaller than the length of a dollar bill. The repairs can usually be performed via mobile service. Repairs can save hundreds of dollars when compared to replacing a new windshield.
Vehicle replacement cycling: Ask for help if needed to determine what additional costs are incurred when delaying vehicle ordering.
Tire Care Tips
Research reveals that motorists rank tires as the second-most important safety feature in vehicles next to brakes, yet few drivers properly check their tire inflation pressure.
The following tire care tips were provided by Goodyear Tire & Rubber Company:
It is important to remember that no matter the car model, the four touch-points between the vehicle and the road are the tires. That underscores the importance of driving on quality tires.
Fleet drivers should check tire inflation at least monthly or before a long trip. Tires should be inflated to the vehicle manufacturer’s recommendations printed on the vehicle door placard or in the owner’s manual, not the maximum limit stamped on a tire sidewall.
Proper maintenance of vehicles and tires — including proper tire pressure — translates into increased automotive safety, optimum driving performance, and significant cost savings, including better fuel mileage.