Modernize the financial strategy of a fleet

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As the economy continues to grapple with the impact of the COVID-19 pandemic, fleet leaders must continue to do more with less and are tasked with increasing efficiency, complying with regulatory mandates, responding to customer expectations and save money. Brian Holland, President and CFO of Fleet Advantage, shared his expertise on the buy versus lease debate, managing maintenance and repair (M&R) costs, as well as some of the key motivators for fleets to adopt new technologies. of security.

Fleet owner: What type of fleets do you work with? And what are the main concerns of fleets when looking to modernize their asset management plan?

Brian Holland: Fleet Advantage works with rental and dedicated transport fleets.

Fleet Advantage’s philosophy compares functional obsolescence to economic obsolescence, i.e. how many years can fleets run their trucks versus how many years should they run their trucks. using [tools that identify] the point at which a truck is more expensive to operate than to replace with newer equipment.

Recognizing the need for an optimal operational strategy to achieve agile scalability (especially during the COVID-19 era), many fleets focused on innovative truck rental structures that offered shorter lifecycles for their trucks. Shorter life cycles allow companies to drive newer, safer and less polluting trucks. As a result, many of these companies are [experiencing] lower maintenance and repair costs, lower fuel expenses, lower emissions and lower costs associated with accidents.

FO: Discuss the lease versus clean debate. Is it more beneficial for fleets to lease their assets or own them, especially in the era of COVID-19?

BH: This is evident by the cash flow of Fleet Advantage Recent analysis of the lease in relation to the property that there is a significant cost reduction opportunity for organizations moving to a shorter lifecycle leasing procurement strategy. In addition, leasing tractor equipment has an after-tax benefit.

Fleet Advantage analyzed the total costs associated with purchasing an asset, including the initial cost of the equipment, depreciation expenses, tax charges, and the resale of the truck asset at the end of its life. useful life, resulting in an immediate cash outflow of $ 67,714. In comparison, the total cash outflows associated with leasing a truck are the fixed annual costs in the form of lease payments resulting in a net present value of $ 62,182, resulting in an after-tax benefit of $ 5,531 for the truck. bottom line of an organization.

FO: What are the main motivations for fleets to acquire new trucks?

BH: Safety, fuel economy and reduction of CO2 emissions. According to the recent Fleet Advantage benchmark survey, 71% of transport fleets have implemented blind spot mirrors as advanced safety devices, while 66% have implemented front and rear disc brakes. . About 50% of fleets said their trucks were 2017 models or older (some fleets have up to 3,000 trucks older than 2017 models).

This is essential as many OEMs have adopted advanced safety systems on 2018 and newer models as standard features, such as collision avoidance and lane departure warnings. Trucks that are 2017 and older models likely do not have these safety technologies and cannot be fitted with collision mitigation devices.

The survey also showed that 11% of fleets estimate they have saved more than $ 1 million by avoiding accidents by switching to newer trucks with advanced safety features. These types of safety technologies have made roads safer for drivers, passengers and other motorists, and reduced the costs of accidents. This is all the more important given that truck fatalities recently reached their highest level in 30 years, with the average cost of each heavy truck accident reaching $ 17.5 million.

More and more organizations are changing the lifecycle of their trucks to benefit from new units that offer better fuel efficiency and an overall total cost of ownership (TCO). Recent Analysis of Truck Lifecycle Data Shows Fleet Operators Now Realize First Year of TCO Per Truck Savings of $ 16,856 When Upgrading to a Model Year Sleeper Truck 2016 to a 2021 model. Fleets can save $ 5,084 per truck in fuel in the first year, a 15% increase in fuel economy and reduction in CO2 emissions. Preserving a cleaner environment has come back to the fore recently, with rules passed by the Air Resources Board calling for reductions in diesel truck exhaust fumes in and around California ports.

FO: Maintenance and repair costs are a large part of the expense for fleets, and equipment that is not properly maintained can erode a fleet’s financial position. How can fleets leverage data to ensure their assets are always up and running?

BH: The end result continues to drive many upgrade decisions, and fleet managers are paying more attention to the costs associated with maintaining an aging vehicle. Data and analytics play an important role today in determining how and when to upgrade to newer trucks to reduce maintenance costs.

Along with the changing mindset of the industry and the move to newer trucks comes a shift to replace trucks more frequently, which has a huge impact on maintenance and repair costs. In a program with a shorter lifecycle, the maintenance strategy becomes preventive rather than reactive (failures and recovery). Plus, when a fleet hits its warranty threshold, the costs associated with that truck immediately increase, making shorter asset lifecycles more profitable. Fleets that use their trucks over a seven-year lifecycle instead of four years spend an additional $ 34,379 on maintenance per truck compared to four-year maintenance costs.

FO: What do customers think of your fleet regarding the widespread adoption of electric and hydrogen fuel cell trucks?

BH: We believe many fleets are taking a wait-and-see approach to electrified technology. While there have been more headlines about Class 8 electric and hydrogen fuel cell trucks, the benchmarking survey found that 30% said they would not see them widely in service for 10 years. (a year ago, 36% said they would not be widely used for another 10 years). 62% indicated the same delay for autonomous trucks. Only 3% of respondents believe that autonomous trucks will be widely used by fleets in the next three years.

That said, however, innovation changes everything. Forward-thinking fleets will be well positioned to take advantage of new technologies as they become available and more common.


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