During calendar-year 2018, passenger vehicle maintenance expenses increased 3-5% year-over-year compared to CY-2017, primarily driven by an increase in labor rates, parts cost, and replacement tire prices. For the purposes of this study, passenger vehicles are defined as cars, SUVs, crossovers, and minivans.
“The increase in maintenance spend was primarily related to higher labor and tire costs,” said Mark Lange, CAFM, managed maintenance analyst for Element Fleet Management.
The No. 1 contributor to increased maintenance costs in CY-2018 are escalating labor rates. The anticipation is that labor rates will continue to increase in 2019 at the rate of inflation, perhaps greater, due to the ongoing labor shortages of qualified service technicians. Increases in labor rates are especially anticipated at service facilities located in high-cost-of-living metro areas.
As vehicle functionality and operation becomes increasingly dependent on electronics and software, it has begun to stretch the skillset of some technicians at independent service providers. There is intense competition for skilled technicians between dealerships, independent service providers, and fleets that operate in-house maintenance facilities.
“We’re also seeing an uptick with labor expenses in the entry level tech positions, such as quick oil change facilities. As a result, tire technicians, oil change/lube technicians, and luxury automotive dealer labor rates have taken a significant jump,” said Lange.
With more technology embedded in each vehicle, independent shops are being required to make significant investments in diagnostic equipment to diagnose and repair malfunctions using the data from in-vehicle technology. In addition, increased vehicle complexity is requiring the hiring of technicians with a higher technical skillset, who typically command higher salaries. The demand for these technicians exceeds the labor supply. Compounding this problem is that older skilled technicians are retiring from the trade at a rate faster than younger technicians entering the profession to replace them. This is increasing pressure on independent shops to boost wages to attract the new talent.
Another contributor to higher maintenance costs in CY-2018 has been price increases for replacement parts. One notable example was increases in brake and caliper costs associated with the increased number of models fitted with larger tire diameter sizes.
The third greatest contributor to increased fleet maintenance spend has been higher replacement tire prices. Tire spend per unit per month increased 8% as replacement tire prices have experienced upward pricing pressures due to higher prices for the commodities used to manufacture tires and the trend to larger diameter, more expensive tires. The increase in OEM automobile wheel diameters has driven up the price of fleet replacement tires, primarily because the larger the tire, the greater the manufacturing expense.
These were some of the key findings of AF’s 24th annual fleet passenger car maintenance survey conducted exclusively by Element Fleet Management. The study is based on an analysis of actual maintenance expenses incurred during calendar-year 2018 by more than 100,000 passenger vehicles, which include cars, SUVs, crossovers, and minivans.
Preventive Maintenance Costs Increase
Changes in manufacturer requirements for oil specs are driving up the cost of preventive maintenance per unit per month. The key factor contributing to the increases in PM costs in CY-2018 is the ongoing shift by OEMs to recommend more expensive, but longer-lasting, synthetic motor oils. The cost of preventive maintenance is increasing due to changes in oil requirements. While the average per unit cost per month of PM increased 9%, the cost per mile for PM has remained flat at $0.006 in 2018, the same as it was in 2017-CY, due to longer oil-drain intervals because of the long-lasting properties of synthetic motor oil.
While longer drain intervals have offset the higher preventive maintenance (PM) costs, there is concern that drivers may become complacent and not be as diligent in regularly checking motor oil levels. Also, during a PM other wear items are checked, such as tires and brakes. By extending oil drain intervals, there will be less frequent inspection of these wear items than what has occurred in the past.
Extended Replacement Cycles
A final factor that influenced maintenance costs in CY-2018 has been the upward trend in the average months in service for fleet vehicles.
“Fleet managers are extending vehicle replacements, which has driven up maintenance costs,” said Lange.
Fleets are keeping vehicles longer and because of this are required to perform additional PM maintenance, such as spark plugs, cooling system, transmission service, and sometimes necessitating the acquisition of a new set of replacement tires.
Maintenance Forecast for 2019
The forecast is that fleet car maintenance expenses will continue to increase in calendar-year 2019, primarily due to higher labor rates.
“We expect to see 3-5% yearly increases in maintenance expenses for 2019 and beyond unless there is a drastic change in the automobile. The industry continues to pursue technology such as autonomous vehicles or electric vehicles that will probably have a significant impact on maintenance expenses. However, until those vehicles become mainstream, we don’t expect to see significant changes in maintenance expenses,” said Lange.
One factor putting downward pressure on maintenance costs is the ongoing vehicle quality improvements occurring each model-year, which has seen a reduction in the need for complex major repairs. In addition, there is increased component reliability, which, in turn, is driving repair costs down, helping to offset ongoing increases in labor costs and parts prices.
“Automobile quality continues to surprise us in a positive way. There’s always a fear that new technology such as back-up cameras, lane departure, or crash avoidance systems will have widespread issues. So far, we’re not seeing any issues related to quality,” said Lange.
One consequence to increased vehicle reliability is the temptation to keep vehicles in service for longer periods. Many fleets are inclined to keep vehicles longer due to increased confidence in vehicle reliability and the decreased frequency of catastrophic failures at higher mileage bands.
Reliability is also helping to increase vehicle utilization rates because there are fewer idle assets due to increased vehicle reliability.
However, as vehicles become more complex, so do vehicle repairs when malfunctions occur. While the technology innovations being introduced in today’s vehicles are very reliable, when they do malfunction, they are very expensive to fix. This can drive up certain repair expenses, such as infotainment systems, for example.
An increasing number of vehicles are equipped with advanced driver-assistance systems (ADAS), such as collision avoidance, surround view, lane departure warning, adaptive cruise control, pedestrian protection, and blind spot monitoring, to name a few. While ADAS benefits outweigh any negatives, they do, nonetheless, come with trade-offs, such as a higher acquisition cost and new variables in maintenance management.
There are many types of ADAS available with some built into vehicles and others available as part of an option package. ADAS relies on inputs from multiple data sources, including automotive imaging, LIDAR, radar, image processing, computer vision, and in-car networking. When ADAS systems need to be serviced, it requires special equipment operated by a specially trained technician. Many previously simple repairs now require a calibration of the ADAS system, consisting of cameras, sensors, and controllers, which requires specialized and expensive tooling and equipment.
“Glass replacement costs have increased with new technology related to Advanced Driver Assistance Systems,” said Lange.
ADAS cameras built into windshields and rearview mirrors are adding complexity and cost to windshield replacements. The replacement cost of a windshield in an ADAS-equipped vehicle is typically higher than that of a non-ADAS unit. In addition to the increased cost of the windshield itself, the vehicle also often requires a recalibration of the entire system, an additional cost.
One example of newer technology reducing maintenance and repair costs is electronic steering, which is more reliable than mechanical hydraulic assist. Another example of reduced maintenance costs due to higher component quality is that brake pad life continues to improve for cars.
There have been a number of vehicle enhancements by OEMs that have contributed to reduced fleet car expenses. Examples include onboard diagnostic displays that change driver’s behavior and diagnostic trouble codes (DTC) that have enhanced the dealer’s ability to more quickly identify maintenance-related problems.
“Driver education on automobile technology is a challenge. Vehicles are often shared and while one driver may have received training by the dealer on the new technology, the subsequent driver did not. This has been an issue primarily with oil life monitoring and diesel engines that use DEF fluid,” said Lange.
Looking to the Future
For the most part, recommended OEM scheduled maintenance has remained unchanged in 2018. Technology improvements will ultimately happen and should have a positive impact on reducing maintenance costs in future years.
“We are not seeing any changes in this area that have had a significant impact in operating expenses. OEM recommended services/intervals have been pretty consistent,” said Lange.
Looking farther in the future, new technologies such as autonomous vehicles will have a radical impact on fleet maintenance expenses.
As autonomous cars are introduced in the coming decade, maintenance events, such as brakes, tires and oil changes, will become more predictable, as driver influence is almost entirely removed from the equation. This type of new technology also tends to shift spend behavior from using lower cost maintenance/repair providers to using the OEM dealerships.
Autonomous vehicles will also allow for very precise predictive maintenance projections. Autonomous vehicles will allow predictive maintenance because you’re taking the driver effect out of the equation, such as brakes, oil changes, and tires.