Holding onto your company vehicles to save money
In this tough economy we have heard a lot of companies state that they plan to hang onto their company vehicles for longer than they initially planned. Although this may seem like a great way to save money, the opposite usually ends up being true.
We talked last week about fleet management and what is required to ensure you keep your costs low (http://www.mayfairleasing.com/blog/?p=34). The week before that we talked about how optimal cycling can ensure you maximize your fleet dollars (http://www.mayfairleasing.com/blog/?p=23). This week we want to combine these topics to examine the idea of hanging onto vehicles for too long. Lets look at these two categories:
Maintenance: I want to talk about this because this should be the most obvious to a company. Although value of a car continually drops, it is the rising costs of maintenance that is easier to see and feel. We always recommend carefully tracking vehicle maintenance expenses, but if you do not do this, we at least recommend that you periodically review the service records of the vehicles and benchmark your expenses to national averages.
What you are most likely to see is a sharp increase in upkeep costs at some point in the vehicle’s life. When this happens depends on miles and condition. However, when it does happen your company is no longer saving money but rather loosing money on a car that should be replaced. If you fall into this category than you are dumping more money into a vehicle than it is worth, not a good idea.
Fuel: I want to talk about fuel next because again, it hits us in the pocket book. Although 2009 was a decent year for gas prices, it is predicted that we will experience future increases. As gas prices go up, it will be important to have the most fuel-efficient model vehicle that will meet your demands. The miles per gallon will differ for each company but most certainly newer model vehicles will have better fuel efficiency than their predecessors.
I could continue on with market value and depreciation but I have talked about these before. What I wanted to do was point out the two ways that keeping a vehicle for another year can actually cost money instead of save money. Just something to think about….