Understanding Fleet Management Costs

Every business has an objective to maximize profitability. To achieve this, costs must be kept at the lowest possible level. Similarly, fleet managers are under constant pressure to improve both productivity and profitability. As such, they have to be well-versed in the fleet management industry’s financial factors.

Understanding how costs are incurred is the first step towards effective fleet management. You can then employ mechanisms that can help lower expenses on areas that have been identified to be running at high costs. Nowadays, competition in every business is very high. If you intend to be in business for long, you must lower your overheads to maximize profitability.

Fleet management costs fall into two broad categories: capital costs and operational costs. In this article, we will look into each type of cost in detail and the means we can employ to reduce these costs.

How can you lower fleet expenses?

You cannot find a solution to a problem if you do not know what is causing it. Therefore, as a fleet manager, you must understand how costs are incurred and the areas that seem costly. This gives you a clear idea of how you can manage these costs.

What are the operational costs?

These are the costs incurred during the day-to-day vehicle activities. In other words, it is the costs arising from the use of vehicles. They include fuel costs, insurance, and maintenance costs.

How can you reduce operational costs?

The majority of the operational costs can be reduced by using fleet management software and other tools like a GPS tracker and vehicle telematics to monitor driver behavior. You can contact experts in this technology at Eyeride to have your fleet fitted with these systems.

  • Fuel costs – This is one of the biggest expenses in fleet management. While the cost can vary because of factors out of your control, there are ways that you can reduce it. Choose vehicles with excellent fuel efficiency. You can also use vehicle telematics to monitor driver behavior in case a driver is misusing the vehicle.
  • Maintenance and repair – Fleet management software can help you reduce these costs. It updates you when the maintenance date is due. It enables you to avoid unnecessary repairs and even save on fuel expenses.
  • Insurance – Explore various options once your current premium expires. First, understand the risks you are faced with to avoid paying for risks that you are not even faced with.

Capital costs

These are costs incurred in acquiring, financing, and depreciation of vehicles. It covers the amount used to acquire the car and the financing means. Here you have the option of buying or leasing of the vehicles. For both methods, you have to understand the financial implications. Understanding your current financial position and the pros and cons of both ways can help you make a better decision.

How can you reduce capital costs?

Capital costs are different depending on the means used to acquire vehicles. The vehicle can be purchased or acquired through a lease. It is imperative to conduct a cost-benefit analysis for each approach and pick one that best suits you.

If you go with a purchase option, it means that repairs and maintenance costs will fall solely on you. For a lease, maintenance can be done by either party depending on the agreement, but you will always incur leasing fees.

Getting financing in the form of loans to purchase vehicles can be costly on the condition that you have to return the principal plus interest. To ensure your fleet has longevity, maintain the cars regularly.