THE CAR AND TRUCK FLEET AND LEASING MANAGEMENT MAGAZINE
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Maintenance Costs

Using Performance-Based Incentives to Optimize the Cost-Effectiveness of Fleet Operations

A fleet cost reduction program goes straight to the corporate bottom line. If a company operates at a 10% annual net profit margin, reducing annual fleet expenses by $100,000 is the equivalent of generating $1 million in sales. Although fleet managers manage hundreds of thousands to tens of millions of dollars in corporate assets, only half are incentivized to achieve targeted performance goals. I advocate incentivization should be a universal best practice extended to all fleet managers.

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Higher Prices Reinvigorate Cost Containment Initiatives

Fleet costs are experiencing upward pressure in a variety of areas, ranging from higher vehicle acquisition due to the proliferation of safety systems to increased material costs to manufacture tires, replacement parts, and upfits.

Higher Labor, Parts Drive Up Fleet Maintenance Costs

Although repair incidents were flat, other fleet-related maintenance expenses were up in calendar-year 2017, primarily in labor rates and parts prices. PM costs were up around 3%, while replacement tire costs increased 5-10%.

Fleet Preventive Maintenance Costs Increase 3%

Extended oil-drain intervals have helped to offset increases in the cost of motor oil because of the expanded use of synthetic oils and cartridge oil filters. Higher labor rates in 2017 exerted upward pressure on preventive maintenance costs.

Replacement Tire Costs Increase 5-10%

For the past four years, tire costs have been stable. But, new cost pressures have emerged in 2017, due to higher prices for the commodities used to manufacture tires and the trend to larger diameter, more expensive tires.

Preventive Maintenance Costs Remain Flat in 2017

Continued stability in crude oil prices, along with longer oil drain intervals, are helping to offset the higher cost of synthetic motor oils that are now required by more automotive OEMs.

Maintenance Costs Remain Flat Despite Rising Labor Rates

Fleet maintenance costs have remained flat over the past 12 months, with the primary factor being increased overall vehicle quality. Other repair costs adjusted for inflation, were, on average, consistent with those in CY-2016.

Fleet Maintenance Expenses Decrease in CY-2016

Fleet passenger car maintenance expenses declined by 7%.

Extended Oil Intervals Keep Preventive Maintenance Costs Flat

Extended oil-drain intervals and flat labor rates have helped to offset increases in the cost of motor oil because of the expanded use of synthetic oils. In 2017, higher labor rates may exert upward pressure on PM costs.

Fleet Replacement Tire Costs Decline

Passenger car tire prices are anticipated to increase in CY-2017. The key factors influencing future replacement tire prices are the cost of materials and the continuing trend to larger diameter and unique tire sizes.