Freight rates are rising, so now may be the perfect time to make the move, but make sure you do a fleet analysis first.
Reports in the trade and business media are repeating the same good news for the trucking industry: 2014 is the year truck utilization is above 99% and freight rates are expected to start climbing 5-6% annually over the next several years. The rising rates are propelling sales of new vehicles to an eight-year high.
Fleet owners finally feel the time is right to replace existing tractors which today have an average age of 9.6 years, a near record. At this crucial juncture, owners and managers need to perform a fleet performance analysis to create an asset replacement strategy that will impact their operations for many years to come.
Everyone knows it’s impossible to replace all aging vehicles at once. This is why a fleet performance analysis is necessary. It enables fleet executives to get the full picture of current fleet operations needed to plan for the future.
The first step to take is to conduct an in-depth examination of the fleet’s data to evaluate fixed and variable costs and statistics that include:
- Vehicle specifications
- Maintenance and repair costs
- Historical fuel economy costs
- Utilization patterns
- Fixed financing costs
- Acquisition and disposal trends
Deciding which vehicles to keep and which to replace can require painstaking calculations and research. But there is a perfect point, sometimes referred to as the “sweet spot,” when it costs less to replace a vehicle than to keep it. Target those vehicles which qualify as the first vehicles to replace.
Since fuel economy can make such a difference to the bottom line, it can be an absolutely key factor in making the keep-or-replace decision. For example, if a new vehicle delivers 8 MPG vs. the 6 MPG of the existing vehicle, that 2 MPG difference can be extremely significant. If a tractor runs 120,000 miles per year and diesel costs $4 per gallon, that 2 MPG increase in the new asset can equate to a savings of 5,000 gallons of diesel per year. That can equal $20,000. Multiply that savings by, say 300 vehicles, and that can yield a total savings of $6 million alone.
That doesn’t begin to factor in lower repair costs associated with new vehicles under warranty, plus the fully manageable preventative maintenance costs, and the top resale value these vehicles will bring. Factoring in these elements – and possibly a new fleet utilization strategy and access to the best financing costs – and a fleet purchasing 300 new vehicles could potentially save almost $12 million.
Even for smaller fleets, a fleet performance analysis performed by a fleet management services provider routinely reduces fleet operating costs by 15-20%.
There’s no doubt that this is great time to be in the trucking business, even with the challenges that stricter regulations are bringing. But the fact still remains that making the decision to buy just one Class 8 truck at $132,000 is a huge one. It should only be undertaken after careful deliberation with transportation experts using the most advanced methods for data gathering and analysis. Taking this preliminary step can pay off for years to come.
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