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  • How to get your fleet replacement cycle right

    Fleet replacement cycle

    As part of managing your commercial fleet it’s important to ensure that you always have the right vehicles at your disposal. This can include buying, leasing, renting, reselling and replacing older vehicles. Following the credit crunch of 2008, more and more ageing vehicles are now on the road due to the lasting effects on the economy and companies ultimately putting off their decision to upgrade by extending their replacement cycles.

    Unfortunately though, by putting off the inevitable replacement cycles you can actually be causing your business more harm than good. Waiting for a more suitable time to replace your company fleet will no doubt increase repair and maintenance costs as well as increasing off road time, impacting deliveries and work schedules and ultimately causing a detrimental effect to overall company image. More commonly a typical fleet replacement cycle is around three to four years but many businesses are experimenting with extensions in this area.

    As depreciation is one of the largest areas of fleet expense it makes sense to experiment with your fleet replacement cycle, however, as a vehicle ages it will require more frequent servicing, unscheduled maintenance, and consume greater levels of fuel. On the flip side of course, over the recent years’ improvements in manufacturer quality of vehicles, warranty, vehicle dependability and increased safety features all mean that extended cycling can be a possible favoured strategy.

    Before you go ahead and jump right in to extending your replacement cycle, it is important to understand that without proper vehicle cycling policies in place you can experience unbudgeted costs that can be severely detrimental to your business. Those opting to extend their vehicle cycle may also experience increased motor fleet insurance costs as well as impacting on driver productivity and overall staff morale not to mention reduced interest in looking after their vehicle. Keeping fleet vehicles for a longer period will also impact on the resale value, due to higher mileage and wear and tear as well as reductions in OEM incentives that could be achieved from higher order levels.

    So how do you go about getting the timing of your fleet replacement cycle right? Here are a few tips we have put together to help you find the optimal replacement cycle.

    Analyse the asset cost

    The more expensive the fleet vehicle, the more sensible it is to keep it for a longer period of time.

    Consider economic lifecycle analysis

    By analysing the total cost of ownership of your vehicles you can estimate the optimum time to replace your vehicles.

    How much does driver downtime cost your business?

    The higher the impact of driver downtime to your business, the shorter your vehicle replacement cycle should be. It can be worth considering a threshold cost whereby you would replace a vehicle over a certain level of repair cost. It is important not to spend more money repairing a vehicle that it is actually worth.

    Consider company image

    The condition of a fleet vehicle may be the first impression that a customer has of your business. It is therefore important to consider how much your fleet vehicles are on show and to what level their condition effects the reputation of your business.

    Vehicle demand

    The more popular the vehicle that you are replacing is, the earlier you can cycle them to gain greater advantage of their favourable supply and demand factors. Depreciation is at is steepest in the first year of a vehicle’s life, flattening more moving forward.

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