Passenger Vehicle Maintenance Spend Increased 4% in CY-2019

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Maintenance costs for passenger vehicles have steadily trended upward over the past 12 months as a result of more complex vehicle technology, the ongoing skilled labor shortages, increased replacement tire prices, and the proliferation of engines that require higher cost synthetic motor oils. 

“During calendar-year 2019, passenger vehicle maintenance expenses increased an average of 4% year-over-year compared to CY-2018, primarily driven by an increase in labor rates and higher PM costs,” said Chad Christensen, strategic consultant for Element Fleet Management.

In particular, maintenance expenses are being impacted by the ongoing trend by fleets and OEMs to downsize to smaller displacement engines. “We’re still seeing the trend where OEMs are using smaller displacement engines with turbos requiring the use of blended semi-synthetic and full synthetic motor oils and, in many cases, increased oil capacity which adds to the cost of an oil change,” said Mark Lange, CAFM, technical services consultant for Element.

Chad Christensen, strategic consultant for Element Fleet Management.

Chad Christensen, strategic consultant for Element Fleet Management.

These were some of the key findings of AF’s 25th annual fleet passenger vehicle maintenance survey conducted exclusively by Element Fleet Management. The study is based on an analysis of actual maintenance expenses incurred during calendar-year 2019 by more than 100,000 passenger vehicles, which include cars, SUVs, crossovers, and minivans.

“PM costs per event have steadily increased more than most other repair expenses due to OEM oil specifications and crankcase capacities,” said Christensen. “OEMs are expected to continue the trend of identifying fuel economy improvements in cars. This trend toward smaller displacement engines and turbos should continue in the short term with the long-range outlook of moving to more hybrid and/or all-electric motors which may ultimately lead to the elimination of oil changes altogether.” 

One factor impacting fleet maintenance costs is the industry-wide shift away from traditional sedans to crossovers and compact SUVs. “As more and more fleets have moved away from cars, one consequence is that crossovers or small SUVs typically have larger engines and larger wheels/tires, which puts upward pressure on maintenance costs. Naturally, maintenance items such as PM, tire replacement, and brake pad/rotor replacement costs are impacted by moving to a larger and heavier vehicle,” said Lange.

Another key contributor to increased maintenance costs in CY-2019 is escalating labor rates. “Labor rates are up 3-5% for most of our vendors in 2019 and we expect the same in 2020,”  said Lange. “The anticipation is that labor rates will continue to increase in 2020 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.”

Passenger Vehicle Maintenance Spend Increased 4% in CY-2019

Source: Element Fleet Management.

The vehicle maintenance and repair industries are experiencing a skilled labor shortage as technicians in the Baby Boomer demographic retire in greater numbers than those replacing them. The skilled labor shortage requires shops to pay more for skilled technicians, which translates into higher shop labor rates.

The skilled labor shortages are being further aggravated by advancements in vehicle technology. Employees with advanced technical skills are becoming more difficult to find in the job market as more experienced technicians retire and fewer young adults enter the automotive repair industry. While new-vehicle technology improves vehicle safety and operating efficiency with each model-year, it also requires advanced technician skills, more expensive shop equipment, and additional steps in many diagnostic and repair processes. As a result, the need for technical skills is growing as the number of experienced technicians decreases, leading to very competitive wages to recruit technicians. And as vehicles become more complex, the industry time standards for many repairs have increased.

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. 

In addition, there has been an uptick with labor expenses primarily in the entry level tech positions, such as quick oil change facilities. As a result, tire technicians and luxury automotive dealer labor rates have taken a significant jump.

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. This is increasing pressure on independent shops to boost wages to attract new talent. With the current tight job market outlook for automotive technicians, machinists, and other technical fields, this trend will likely continue in the near future.

Passenger Vehicle Maintenance Spend Increased 4% in CY-2019

Source: Element Fleet Management.

Another factor causing labor costs to increase is the trend to higher minimum wages. Historically, quick lube oil change facilities and tire retailers have been a good starting point for individuals interested in being automotive technicians or working in the industry while attending a technical college. Wages at these types of facilities are typically comparable to other low-skilled positions or entry level positions in other service industries. These types of positions are most likely to be impacted by increases in minimum wage with the larger metropolitan areas passing ordinances for $15 or higher hourly wages. For that reason, labor cost will be the driving factor increasing oil change, basic preventive maintenance services, and tire installation costs. These increased labor costs are passed through to consumers and fleets in the form of rising shop labor rates.

“Fleets are going to have to think about the vendors they utilize as mechanic costs increase, it will put upward pressure on the labor rates they charge to fleet customers,” said Lange.

PM 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-2019 is the ongoing shift by OEMs to recommend more expensive, but longer-lasting, synthetic motor oils. 

“Engine oil technology continues at an accelerated pace to increase fuel economy and decrease emissions,” said Christensen. “This trend to transition to more expensive synthetic motor oils has led to higher costs for an oil change event.”

Passenger Vehicle Maintenance Spend Increased 4% in CY-2019

Source: Element Fleet Management.

While longer drain intervals have offset the higher PM costs, there is concern that drivers may become complacent and not be as diligent in regularly checking motor oil levels. Also, during a typical 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 in the past. 

Tech Increasing Repair Costs

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. 

Mark Lange, CAFM, technical services consultant for Element Fleet Management.

Mark Lange, CAFM, technical services consultant for Element Fleet Management.

This technology is now included as standard equipment on a wide-range of popular fleet models and these systems include expensive components that are pushing repair costs higher. 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 since ADAS relies on inputs from multiple data sources, including automotive imaging, LIDAR, radar, image processing, computer vision, and in-car networking. 

ADAS require special equipment that is operated by a specially trained technician when service is needed, which create additional maintenance costs.

ADAS helps prevent many accidents causing some collision repair costs to be avoided through the prevention of accidents in the first place. However, this new technology adds new components to vehicles, such as cameras, proximity sensors, and radar/LIDAR. It also adds additional steps to common repair procedures that didn’t exist previously. For example, many minor body repairs, windshield replacements, and steering and suspension repairs now require ADAS recalibration. This adds to the complexity of the repair, increasing labor costs.

Passenger Vehicle Maintenance Spend Increased 4% in CY-2019

Source: Element Fleet Management.

For instance, glass replacement costs have increased with new technology related to ADAS cameras built into windshields and rearview mirrors. This has added 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. 

A minor collision that used to only require a bumper cover replacement can now involve bumper cover and radar replacement, along with pre- and post-system scans and ADAS recalibration. 

Forecast for Balance of CY-2020

In addition to upward pressure on maintenance cost, there are also mitigating factors that are offsetting costs.  

A major offsetting 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. Vehicle quality in 2019 remained high and these higher quality levels are forecast to continue into the coming years.

“There was no significant change in vehicle quality in 2019 compared to prior years. Even with all the new technology introduced on today’s vehicles, we’re not seeing trending issues with items such as lane deviation, adaptive cruise, auto headlamp dimming, etc.,” said Lange. 

Passenger Vehicle Maintenance Spend Increased 4% in CY-2019

Source: Element Fleet Management.

Although maintenance and repair costs have increased faster than the rate of inflation year over year, these cost increases have been somewhat mitigated by ongoing improvement in vehicle build quality and longer-lasting components. The trend in better built vehicles continues, with catastrophic repairs being fewer and trending toward later in a vehicle’s life.

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. There have also 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.

Automobile quality continues to remain high. 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, the industry is not seeing any issues related to quality.

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.

“As fleets adopt more hybrid or electric cars, we should see a reduction in PM-related costs, but the overall maintenance costs or cost per mile may not be negatively impacted overall. As with any newer technology, utilizing a specialized vendor may be necessary to do more of the maintenance which typically means an increase in labor/parts costs for even routine maintenance,” said Lange.

About the author
Mike Antich

Mike Antich

Former Editor and Associate Publisher

Mike Antich covered fleet management and remarketing for more than 20 years and was inducted into the Fleet Hall of Fame in 2010 and the Global Fleet of Hal in 2022. He also won the Industry Icon Award, presented jointly by the IARA and NAAA industry associations.

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