When discussing vehicle replacement strategies with potential clients, one of the most common refrains we hear is that they just run their vehicles into the ground, hanging onto them until they can’t possibly keep the vehicles any longer. It’s a strategy that may seem fiscally responsible and disciplined from the outside, but in reality, causes a lot more harm than most realize. In this article, we’ll discuss the reasons why introducing a vehicle replacement schedule may be the right move for your company.
In This Article
Reduced Costs
Improved Image
More Predictable Budgeting
Reduced Costs
One of the main reasons why companies elect to hold onto their vehicles well beyond their optimal replacement point is the belief that doing so will save them money. On the surface, that doesn’t sound like an unreasonable conclusion. It’s better financially to have a vehicle that’s paid off rather than take on a monthly loan or lease payment, right? Unfortunately, that logic doesn’t take the entire picture into account.
When calculating their fleet costs, we find that many companies fail to account for the additional maintenance required to keep an older fleet of vehicles operating. Below is a graphic from Consumer Reports showing that, depending on brand, it’s not unusual for maintenance and repair costs to quadruple, or more in Year 10 of a vehicle’s life as opposed to Year 3.
Furthermore, every time one of the vehicles is in need of repair, it’s taken off the road, and thus not available for business use. As a result, the company needs to operate without that vehicle, or rent a replacement for the duration of the repair. Either way, the loss of that vehicle is going to cost money.
A replacement schedule solves these issues by ensuring that vehicles are replaced long before costly repairs become the norm. It also allows you to schedule routine maintenance in advance, thus saving money by not performing unnecessary repairs towards the end of a vehicle’s life-cycle.
Improved Image
There’s an old adage that says, “You don’t get a second chance to make a first impression”. While it may seem cliché, it’s true, especially when it comes to business. The image you convey to the outside world is incredibly important. It can help create credibility and increase brand recognition. The vehicles used by your business are part of your corporate image, and as such, should represent you to the outside world. Showing up to a client or prospect’s location in a run-down vehicle, that’s clearly in need of some TLC is going to have people second-guessing your company’s professionalism. The thought process will be that if you can’t even bother to keep up appearances when it comes to your own vehicles, why should we trust you to solve our problem correctly?
Implementing a replacement schedule solves that problem by ensuring that vehicles are cycled out before they become an image liability. This means that you can be absolutely certain that the vehicle pulling up to the client or prospect location will be appropriate and well-maintained.
More Predictable Budgeting
When speaking to the people charged with overseeing the “run it until they die” fleets, one of the most common frustrations that they have is the inability to accurately budget their fleet costs in advance. With the majority of budgets being drawn up and approved on an annual basis, it’s nearly impossible to accurately account for all of the potential costs that may arise. This often leaves those in charge in the unenviable position of being drastically over or under budget.
A vehicle replacement schedule can help solve that problem. By putting a replacement schedule in place, you’ll know exactly what the vehicle is going to cost you, and for how long. Maintenance costs may still vary, but within a much smaller margin. You could also look into implementing a full maintenance plan through a fleet management company to pin down your TCO even further. A full maintenance plan essentially covers all vehicle repairs and maintenance for one fixed monthly cost. Coupling a replacement schedule and full maintenance plan together will allow you to accurately budget your fleet costs for years in advance.
For more information regarding vehicle replacement schedules or full maintenance plans, please give us a call at 800-243-0182 or email us at info@motorlease.com.
Motorlease Fleet Management & Leasing Solutions