It has been said a fleet manager can do his or her job pretty well by managing just two costs associated with the provision of fleet vehicles: fuel (variable) and depreciation (fixed). Considering depreciation is more than half of fixed costs (fuel being the same for variable costs), this isn’t a far-fetched concept.
Managing depreciation has been at — or near — the top of fleet managers’ cost control/reduction lists for a long time, and continues to be today.
There are only two elements to depreciation: original cost and resale proceeds; however, there is much that happens in between fleet managers should focus on that will ultimately determine how large — or small — that cost will be.
1. Understanding Original Vehicle Costs
The depreciation puzzle begins, obviously, with the original cost of the vehicle. Both leased (under open-end, terminal rental adjustment clause [TRAC] leases) and owned fleets work at negotiating the lowest possible cost for new fleet vehicles. This includes factory orders as well as the occasional emergency order from dealer stock.
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