Managing the Financial Side of Commercial Fleets

Fleet TCO Reaches 5-Year Low, Element Says

May 17, 2016

Infographic courtesy of Element.
Infographic courtesy of Element.

The total cost of ownership of fleet vehicles managed by Element Financial Corp. fell 14% in 2015 from the prior year and has reached a five-year low due to low fuel prices, the fleet management company has announced.

The findings came as part of Element's newly announced Element Total Cost of Ownership (TCO) Index, which will track TCO factors such as vehicle depreciation, fuel maintenance and interest expense. The annual index assigns 2013 a baseline score of 100 and rates future years. For 2015, the index was 83.3, according to Element.

"The Element Fleet TCO Index suggests that now may be a good time to replace vans and pickups while the resale market is still strong for those types of vehicles," said Bob Sandler, senior vice president of strategic consulting for Element Fleet Management. "Lower gas prices provide an opportunity for fleets to make replacement investments, increasing safety and fuel efficiency without a major year-over-year spike in expenses."

Element also noticed an increase in average fuel economy data from vehicles in the data, indicating that fleets have been adding higher-mpg vehicles.

Element noted three factors it considered in its TCO analysis, including average fuel costs, depreciation, and monthly maintenance expenses.

Average U.S. fuel costs fell 29%, because the price of fuel fell to $2.43 per gallon in 2015 compared to $3.36 the previous year and improvements in vehicle miles per gallon.

Depreciation costs rose 1% due to a higher average initial cost of vehicles and offset by continued strength in the resale market for vans and pickups.

And lastly, a 1% rise in average monthly maintenance costs resulted from a 1% increase in unscheduled repairs and 4% increase in preventative maintenance expenses. Tire costs remained static.

The index includes five vehicle categories including pickup trucks, cargo vans, sedans, SUVs, and minivans. Element sourced the data from all of its operations, including recent acquisitions.

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