Fleet TCO Index: 14% drop in 2015 vehicle costs

Lower costs driven by lower fuel prices

Element Financial Corporation debuted its first Element Fleet Total Cost of Ownership (TCO) Index, a proprietary annual look at major cost categories affecting vehicle fleets, bringing greater clarity to company vehicle expense for businesses.

Using Element’s base of historical fleet data, the inaugural Fleet TCO Index shows that the total cost of having a vehicle fleet fell by 14% (14 points) from 2014 to 2015. The lower costs are driven primarily by dramatically lower fuel prices. Other factors that make up the TCO Index include vehicle depreciation, maintenance and interest expense. Overall, companies with fleets experienced their lowest expenses in at least five years.

According to the index, there are more than 9.2 million fleet cars and trucks on the road today. Like laptops and smartphones, fleet vehicles are essential tools that provide services, generate sales and deliver for customers every day.

“The Element Fleet TCO Index suggests that now may be a good time to replace vans and pickups while the resale market is still strong for those types of vehicles,” said Bob Sandler, senior vice president of Strategic Consulting for Element Fleet Management. “Lower gas prices provide an opportunity for fleets – or individuals – to make replacement investments, increasing safety and fuel efficiency without a major year-over-year spike in expenses.”

TCO analysis noted these key factors:

  • Average U.S. fuel costs fell 29%, driven by the price of fuel ($2.43 per gallon in 2015 vs. $3.36 the previous year) and improvements in vehicle miles per gallon (MPG).
  • Depreciation costs rose 1%, attributed to a higher average initial cost of vehicles, and offset by continued strength in the resale market for vans and pickups.
  • A 1 % rise in average monthly maintenance costs, driven by an increase in unscheduled repairs (1 percent) and an increase in preventative maintenance expenses (4 percent). Tire costs remained static year over year.

Element expects the index to be useful for financial professionals who evaluate risk related to uncontrollable market forces such as fuel and tire prices, interest rates or fluctuations in the used vehicle market.

“The Fleet TCO Index will provide fleet managers with improved insight into perhaps the most vital requirement of their jobs – cost analysis, giving them the ability to make evaluations through the lens of industry trends,” said Sandler. “The Index also will educate financial analysts and individual vehicle owners, simplifying often difficult-to-understand data to explain true costs of owning an automobile.”

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