Calculating a vehicle cost center

4 minute read

Fleet Management, Insurance, Cost, Benefits, Customer Success

When speaking with a client about their recent vehicle purchase, the owner smiled and said, "I want to show you something". He pulled out a spread sheet containing the cost centers for all of their pickup trucks, vans, rack trucks and dump trucks.

"I know how much it costs to run these trucks, which is why we decided to replace that aging pickup with a 2-year old Chevy we just picked up at the auto auction," he said.

I was eager to learn how he was able to distill this key metric, or when it's time to replace a vehicle instead of repairing. I want to share with you what I have learned since that day, calculating total fleet costs, and why this is the first step in controlling costs to improve your bottom line.


Vehicle cost center worksheet (Excel)

Download Spreadsheet

Finding your cost per mile

vehicle_cost_center-1

There are several areas we could associate with the 'vehicle cost center' and while they will vary from fleet to fleet, here are some common areas:

    Cost/mi Percentage
Labor $0.83 49%
Fuel $0.23 27%
Maintenance $0.08 14%
Depreciation $0.46 5%
Insurance $0.08 5%

 

 

 

 

 

 

Based on the American Transporation Research Institute's 2019 report, the average cost per mile to run a truck is up to $1.79, which is a 6% year over year increase. However, you should take these numbers with a grain of salt as they vary by region, fleet size and load type.

Using metrics to cut costs

Now that you have a baseline for what your fleet is spending, it's time to look for the easiest gains to boost the bottom line and improve your margins. As you can probably spot, labor and fuel make up a bulk of the vehicle's operational cost and is a logical place to start looking to shave dollars.

Reduce the time and distance drivers are on the road for compounding savings

 

Top tips to cut fleet costs

Slow it down

For every 5 MPH slow your trucks travel on the highway, fuel costs are reduced by 9% (NHTSA)

Optimize your routes

Using commercial truck GPS navigation helps reduce miles travelled by up to 10% (FMCSA)

Improve driver habits

Changing bad driving habits can improve fuel economy by 33% (Fleet Financials)

Cut out idling

Idling is bad for the environment, engine emissions equipment, is illegal in many states, and wastes 100% of the fuel burned while returning 0% productivity

How to calculate your vehicle costs

Organize your expenses into the basic categories mentioned above, or come up with your own that better suite your business. Start to calculate your cost per mile fleet wide to see how it compares with the numbers published by the ATRI.

  • Focus on the areas you can improve the most in to start
  • Don't over-complicate, you can get more detailed later
  • Create small changes (that you can stick with) to see the results
  • Keep the metrics posted somewhere your team can see
  • Update metrics on a regular basis: annually, quarterly or monthly
  • Track changes over time to look for the next area to improve

Vehicle cost center worksheet (Excel)

If you want to see how much money your fleet is spending per truck, download the worksheet (free) to calculate your cost per mile based on your annual spend or vice-versa.

Download Spreadsheet

To learn more about how to implement a telematics system to gather data used in this spreadsheet, check out our article on GPS for first time buyers.

 

Tagged: Fleet Management, Insurance, Cost, Benefits, Customer Success