Managing cost starts with the commercial trucks you buy

Managing cost starts with the trucks you buy

Are you looking for ways to control operating costs? Well, you’re not alone. According to Robert “Bob” Johnson, a former fleet manager, and current director of fleet relations for NTEA, “The impact of a new vehicle acquisition program can be seen in multiple areas: Initial acquisition costs; vehicle productivity; vehicle fuel efficiency; and long-term maintenance costs. Fleet acquisition costs include the actual costs of the vehicle and associated upfitting, as well as the overhead costs of funding the acquisition.”

He goes on to say that fleets should start by evaluating exactly what the vehicle needs to do and then ensuring that the design and specifications match the requirements. Adding extra or more complex components to a vehicle may increase its productivity, but there are trade-offs. Not only will add-ons increase the upfront cost of the unit, but also they may increase its overall weight, which could lead to less payload and more maintenance. The extra weight and potentially increased engine idle time necessary to operate the equipment could also negatively affect fuel economy.

This doesn’t mean that you should never consider add-ons. Johnson says, “Before you add components, simply be sure to calculate their long-term benefits using a net present value [NPV] life-cycle cost analysis. An NPV analysis can be used to evaluate both upgraded truck chassis components and productivity add-ons. To make such an analysis, first identify your internal cost of money [more on that later] and then determine how soon the upgrades and/or additions need to return their costs [payback period]. For tax-paying entities, factor in your total effective income tax rate so that you can determine the impact of depreciation on the proposed upgrades. A vehicle investment will have a zero NPV at the end of the payback period if the payback equals your cost of money. If the return is less, the NPV will be negative; if it is earning more, the NPV will be positive.”

One of the factors impacting an NPV analysis is the cost of money. Money can be obtained from multiple sources, including internal capital, direct borrowing (debt) and leasing.

It is important to make the best decision for your operation. Just because you have always financed new vehicles using one particular option does not mean that you should continue to do so, Johnson says. Another factor for tax-paying entities is how the government treats capital investments for depreciation purposes. This is a constantly changing wildcard and should be reevaluated every year.

The way you spec’ your next truck can have a huge impact on long-term maintenance costs. If a truck is not properly designed for the intended application and is overloaded, maintenance costs will increase. While this seems to be an obvious observation, avoiding overload can sometimes be tricky, notes Johnson. When thinking about overloading, you need to go beyond traditional GVWR, GAWR and GCWR measurements and look at specific applications and how those applications impact individual chassis components. Start by identifying common high-maintenance components in relation to the individual truck’s drive and duty cycles.

It always helps to take the time to ­look at your current fleet maintenance history and identify any high-failure components and systems. More than likely, these high failure rates will be associated with some form of component overloading, whether in terms of actual load imposed by the truck’s application or from an excessively high utilization rate. Identifying and correcting these issues can reduce your maintenance costs. In addition, some corrective components can be retrofitted to existing trucks to save you even more money.

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