Looking Past Pandemic Conditions
Investing in new vehicles during an economic slowdown saves a manufacturing fleet $525,000.
You know the old saying: You’ve got to spend money to make money.
But when expenses are tight, committing to that practice can be tough, especially when it comes to major capital expenditures. Skipping an order cycle in times of economic uncertainty can feel like a weight off your shoulders today, but leaving aged vehicles in service past their replacement point can leave you with operating cost headaches tomorrow.
A North American manufacturing fleet with 5,000 cars, SUVs, vans and trucks was struggling with the financial uncertainties and production delays surrounding COVID-19. Looking to control short-term costs, the fleet team considered cancelling their spring ordering cycle and continue running their older vehicles for another year.
While this decision would provide some much-needed financial relief, it also meant 550 aged vehicles would remain in service far longer than originally anticipated. Before moving ahead, the fleet manager consulted with their ARI team to confirm canceling orders was the best move for their company.
After projecting the next 12 months of operating expenses for the 550 older vehicles through data modeling, that dollar amount was compared against the anticipated cost to operate new vehicles during the same time period.
While the company’s monthly lease payments wouldn’t change much over the 12 months, the operating cost delta was staggering. Keeping the current vehicles in service for one additional year would cost an additional $525,000 in maintenance expenses above the cost to operate the new vehicles for the same 12 month period.
The choice was clear. The company moved forward with their orders to best position themselves for future success by adhering to their cycling parameters despite market conditions. Now they can focus on their recovery plans and better days to come, instead of grappling with long-term repercussions of short-term decisions.
$525,000 Maintenance expenses avoided in just 12 months.
Fleet ROI Positive bottom line value of cycling strategy.
What Does Your Future Look Like?
As you’re navigating your own fleet recovery, visit the ARI blog for cost avoidance practices that balance today’s urgency with tomorrow’s stability and subscribe to The Morning Brake e-newsletter from Holman Enterprises
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