Element Financial Corporation today debuted its first Element Fleet Total Cost of Ownership (TCO) Index, a proprietary annual look at major cost categories affecting vehicle fleets, bringing greater clarity to company vehicle expense for businesses.
Using Element’s deep base of historical fleet data – the most extensive in the fleet management industry – the inaugural Fleet TCO Index shows that the total cost of having a vehicle fleet fell by 14 percent (14 points) from 2014 to 2015. The lower costs are driven primarily by dramatically lower fuel prices. Other factors that make up the TCO Index include vehicle depreciation, maintenance and interest expense. Overall, companies with fleets experienced their lowest expenses in at least five years.
There are more than 9.2 million fleet cars and trucks on the road today*. Like laptops and smartphones, fleet vehicles are essential tools that provide services, generate sales and deliver for customers every day.
“The Element Fleet TCO Index suggests that now may be a good time to replace vans and pickups while the resale market is still strong for those types of vehicles,” said Bob Sandler, senior vice president of Strategic Consulting for Element Fleet Management. “Lower gas prices provide an opportunity for fleets – or individuals – to make replacement investments, increasing safety and fuel efficiency without a major year-over-year spike in expenses.”
Looking at industry trends, the Element Fleet TCO analysis noted these key factors:
• Average U.S. fuel costs fell 29 percent, driven by the price of fuel ($2.43 per gallon in 2015 vs. $3.36 the previous year) and improvements in vehicle miles per gallon (MPG).
• Depreciation costs rose 1 percent, attributed to a higher average initial cost of vehicles, and offset by continued strength in the resale market for vans and pickups.
• A 1 percent rise in average monthly maintenance costs, driven by an increase in unscheduled repairs (1 percent) and an increase in preventative maintenance expenses (4 percent). Tire costs remained static year over year.
Element expects the index to be useful for financial professionals who evaluate risk related to uncontrollable market forces such as fuel and tire prices, interest rates or fluctuations in the used vehicle market.
“The Fleet TCO Index will provide fleet managers with improved insight into perhaps the most vital requirement of their jobs – cost analysis, giving them the ability to make evaluations through the lens of industry trends,” said Sandler. “The Index also will educate financial analysts and individual vehicle owners, simplifying often difficult-to-understand data to explain true costs of owning an automobile.”
For more information and to view the TCO Index infographic, visit www.elementfleet.com/insights.
About the Element Fleet TCO Index
Element developed the Fleet TCO Index to calculate Total Cost of Ownership (TCO) for fleet vehicles by looking at the major cost categories. These include depreciation, interest expense, fuel and maintenance costs. The Fleet TCO Index uses 2013 as the base year with a starting value of 100. The Index showed a drop in TCO for fleets to 96.8 in 2014 and then to 83.3 in 2015, a 14 point year-over-year decline.
