The whole life cost is one of the most important calculations a business will make when making an investment in fleet.
Factoring in costs such as fuel, taxation, maintenance and insurance, the whole life cost will determine when it makes sense to upgrade over maintaining and servicing existing assets.
Your contract hire provider should have access to financial modelling software to take into account the variables such as fuel, fleet, taxation, maintenance and insurance.
When two vehicle options are lined up alongside each other, it can sometimes be the case that the vehicle with the higher upfront cost actually costs less over, say, a three-year period because of savings with fuel economy, taxation and insurance.
Businesses only considering the list or rental price are failing to take into account 30-40 per cent of what is called a vehicle’s “cost envelope”.
A whole life cost approach will provide a business with a more accurate indication of fleet costs, control of bottom line spending, lower emissions and better staff motivation.
Integrating a whole life cost also helps establish the optimum replacement cycle and funding method. It is key to work out the the optimum replacement cycle for your fleet, which may not be at the industry average of three years. Making this more flexible could make all the difference and introduce substantial monthly savings without causing much of an issue.
If you’ve found this article useful then make sure you visit our complete A-Z of business fleet terms, which provides a complete glossary so you can make an informed purchasing decision.
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