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What does fleet management mean if it doesn’t mean figuring out ways to reduce fleet costs and increase profits? Any fleet manager will tell you: it’s all about efficiency. Companies are regularly looking for ways to reduce operating costs and streamline their fleets so they’re spending less and doing more. But before you can even begin to think about reducing fleet costs, you have to understand what they are and the factors involved in fleet cost management.
Defining Fleet Management Costs
Fleet management costs are the various expenses associated with operating a fleet. Typically, they’re divided into fixed costs and operational costs, and include everything from your license and permit costs to vehicle insurance to fuel costs.
Fixed vs. Operating Costs
Understanding fixed and operating costs is essential to controlling and reducing fleet expenses.
Fixed costs are exactly what they sound like: expenses that are the same month after month, such as:
- Vehicle or lease payments (acquisition costs)
- Licenses and permits
Operational costs are those that are required for the daily operation of your fleet but may vary from one payment to the next. Fuel is the biggest one of these expenses, and it has been a huge topic of discussion due to rising fuel prices. Even with fuel management programs and fuel cards, many companies are looking for ways to reduce fleet fluel costs and consumption. And a number of them are successfully reducing fleet costs with electric vehicles.
Beyond fuel, other examples of fleet operating costs are:
- Parts replacement and repair costs (including downtime)
- Maintenance and upkeep
How to Calculate Overall Fleet Operating Costs
A fleet management cost analysis is a process that involves calculating your total cost of ownership (TCO), including buying, selling, and funding vehicles, as well as reviewing your fixed and operating costs, and your cost-per-mile (CPM).
With fleet management software, you can monitor these metrics and others in real-time to help you identify ways of lowering fleet ownership costs without cutting corners.
1. Calculating Total Cost of Ownership
The first step in conducting a fleet management cost analysis is calculating the total cost of ownership. To do this, you’ll need to add up all of your fixed and operating costs.
If you’re using EVs, it’s important to note that your fuel costs will be replaced with kWh of electricity used. You’ll also have much less depreciation to factor into your analysis with an EV fleet. Other than that, the calculations are going to be the same.
You can calculate your TCO on a monthly or annual basis, and you can use that information to get a better idea of how to reduce expenses and continue to improve your fleet management cost savings.
2. Calculating Fleet Maintenance Cost-Per-Mile
There are a couple of different ways that you can calculate your cost-per-mile, depending on how frequently you want to track it. The simplest option is to take your TCO and divide it by the miles that your fleet drives in a year.
$250,000 TOC ÷ 150,000 miles = $1.66 per mile
You can then use that information to drill down further into TCO fleet management: What is your fleet management cost per vehicle? Or your overall fleet management fuel cost? As you regularly conduct a fleet operating cost analysis, these numbers will inform you as you strive toward fleet cost reduction and make future fleet management decisions.
The Importance of Reducing Costs for Fleets
Now that you’ve taken the time to calculate what your fleet is costing you, it’s easy to see the importance of reducing fleet costs. Not only will it help you save money, but it will increase your profitability and help you attain more sustainable growth.
How Fleet Expense Control Impacts Your Profitability
It’s Business 101: the more you spend on your fleet operations, the less you keep as profit. But reducing fleet management costs can be incredibly difficult.
From the unpredictability of rising fuel and fleet vehicle costs to ongoing maintenance costs of ever-aging fleets, effective fleet management strategies for how to reduce fleet costs have never been more important.
How Reducing Fleet Fuel Costs Increases Your Company’s Role in Sustainable Growth
Many companies are also using this fleet cost analysis to become more sustainable and improve fleet efficiency, such as switching from costly diesel fleets to EVs. Reduced fleet management fuel costs mean fewer expenses overall, allowing you to create a more sustainable plan for future growth.
Strategies to Lower Fleet Management Costs
1. Use Your Vehicles Efficiently
Use your cost analysis to ensure that you are using vehicles as efficiently as possible. If you have an entire fleet, make sure that they’re not driving unnecessary miles or overlapping each other on routes. Focus on fuel economy, reducing fuel prices, and other ways to improve overall efficiency.
2. Invest in Affordable Training for Your Fleet
Your drivers are the ones most familiar with the vehicles and should therefore be trained to be more mindful and aware of the costs of their vehicles and day-to-day operations. Educate drivers on efficient driving practices, vehicle maintenance and care, and other elements to help reduce expenses. This can also increase driver safety and help reduce driver behavior issues like excessive idling or improper vehicle care.
3. Schedule Regular Maintenance and Preventive Upkeep
Preventative maintenance can save a fortune on repairs and fleet replacements. If you don’t have an onsite shop or mechanic to handle fleet maintenance, find one that you can outsource to that provides reliable, affordable service. You might be surprised to find how a few preventative measures will significantly reduce your fleet maintenance costs.
4. Evaluating Vehicle Lifecycle Costs
A key component of reducing costs is staying on top of fleet lifecycle cost management. Vehicle lifecycle costs include lease/loan payments, depreciation, fuel expenses, maintenance and repairs, and infrastructure expenses. Understand what each vehicle costs on a lifecycle basis and you can reduce expenses on a much larger scale.
Pitfalls of the Current Fleet Management Model
Fleet management has long been looking for an upgrade to the way it’s handled. Unfortunately, until recently, there just wasn’t a better way. Things like high capital costs and the limitations of high-mileage leases have kept fleet managers struggling to reduce expenses and improve profits.
High Capital Costs
Right now, vehicles are expensive. That’s true for consumer vehicles, commercial vehicles, and fleet vehicles—all of their inventories have been affected by the production and shipping interruptions resulting from COVID. While prices are starting to drop, acquisition is still one of the biggest costs for businesses.
Limitations in High-Mileage Leases
High-mileage leases come with several limitations and exclusions. That can require you to pay higher prices for the miles that you’re driving. While that’s a part of business for many fleets, a high-mileage lease isn’t always ideal.
High Maintenance and Fuel Costs
Maintenance and fuel costs are some of the biggest expenses for businesses today. Plus, they’re constantly rising and falling, and difficult to predict and budget for. That makes it increasingly challenging to continue to manage your fleet effectively.
Introducing Spring Free EV
If you’re looking for a better solution for your fleet management, consider upgrading to EVs like those offered by Spring Free EV. We have a selection of EVs for all your fleet needs, from business sedans to delivery vans and everything in between. We make it easy to qualify and can work with you to help create the fleet of the future for your business.
Benefits of Spring Free EV for Fleet Management
When you choose Spring Free EV for your fleet management needs, you’ll enjoy several benefits. Two of the biggest perks include the lower TOC and more flexibility in leases.
Lower Total Cost of Ownership
When compared to a similar gas sedan model, an EV from Spring Free EV can cost more than $400 per month less, saving you a total of over $5,000 each year per vehicle. If you’ve got 10 vehicles in your fleet, that’s $50,000 in savings.
Flexible Lease Options for High-Mileage Fleets
Our EV leases also offer an array of flexible terms, including low upfront payments, unlimited miles, and shorter-term options for those who need them. Need something even more customized and unique? Ask us how we can create an EV solution for your fleet management needs.
Today, fleet management is more important than ever. It’s one of the biggest expenses for the businesses that have them, and it’s one of the easiest to control if you know how to do it. Keep this information in mind, and when you’re ready to switch, reach out to Spring Free EV to discuss your new EV fleet.