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Driving down your fleet costs – the total cost of fleet ownership

There are some costs associated with operating a fleet – such as the cost of procuring the vehicle and paying for the fuel to keep it ticking over.
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Some fleet costs are more obvious than others, but before taking on any vehicles it is key for a business to understand the total cost of fleet ownership. Here we outline what you need to ask up front.

There are some costs associated with operating a fleet – such as the cost of procuring the vehicle and paying for the fuel to keep it ticking over. However, there are many more costs associated with it – insurance, maintenance, repairs, breakdown cover and so on.

When you first approach a fleet provider, you should be confident that it is doing everything it can to drive down your fleet costs on your behalf.

We caught up with Chris Lovegrove, total cost of ownership manager at FCA, to find out what sort of things a fleet provider should be doing to help you keep your costs down, and run as efficiently as possible.

Fleet costs: The total cost of ownership

A TCO manager will usually benchmark the fleet provider’s offerings against the closes equivalent from a number of different competitor brands. Lovegrove’s role is to make sure FCA can offer the lowest possible cost of ownership to its customers.

“To do this, I monitor and analyse all aspects that contribute to the cost of running an FCA car or van. This is mostly made up from three factors: depreciation, maintenance and fuel. The rest are smaller contributors. Whilst the list price gives a good indicator of how expensive a car or van is to own, actually there is more to it,” he explained.

Some factors of total cost of ownership need to be factored in on an ongoing basis – for example, fleet owners should always be prepared to switch insurance suppliers if a better deal comes along.

However, some factors – such as depreciation of a particular vehicle and its fuel consumption – are things you need to investigate up front, when agreeing a contract.

Depreciation as a factor of fleet costs

The residual value of a vehicle after it has depreciated, so Lovegrove’s role includes providing leasing companies with all the information they need, to make a value judgement that they can be confident in.

“I work closely with the product team to share insight and market intelligence to ensure we bring new products to market with the equipment and specifications that is most relevant both now and in the future,” he explained.

“I also keep contact with the residual value guide companies, and keep them up to date with new product information and model launches, providing product demonstrations and test drives, to show off our products in all their glory.”

A leasing company would carry the risk – but this is something a fleet owner should also be aware of, as depending on the type of finance this can affect the amount you pay for the vehicle.

For example, monthly payments on a lease are calculated as the original cost of the car minus the cost at the end, so you only effectively pay for the depreciation of the vehicle while it is in your care. Luxury cars are often chosen as they hold their value better.

Fuel consumption as a factor of fleet costs

According to Lovegrove, vehicle engines are developed years in advance by global powertrains companies, and they will be working today on the future power plants of tomorrow’s fleet provider offerings.

“I can’t change the fuel consumption, but we can include standard equipment such as stop/start, smart alternators and other technology to enhance the efficiency,” he said.

“For example, we have the Eco-Pack on Fiat Tipo, as standard equipment on our business edition ‘Elite’ trim, improving the mpg at no extra costs to the customer, just savings.”

It’s important to ask about these features when selecting a vehicle to be as efficient as possible with energy consumption.

Businesses should also consider which type of fuel works best with the demands of the fleet – petrol is often cheaper, but diesel engines can produce more power and so can be more economical if your fleet covers a lot of miles.

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About Author

Letitia Booty

Letitia Booty is a special projects journalist for Real Business. She has a BA in english literature from the University of East Anglia, and since graduating she has written for a variety of trade titles. Most recently, she was a reporter at SME magazine.

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