The impact of fleet fuel costs on business operations is a question people typically ask when gas prices are high. Since we’re all enjoying historically low fuel costs, fuel-efficiency seems like a non-issue right now. And while it’s perfectly understandable to take advantage of low fuel costs – by either adding to a fleet or upgrading to better vehicles at the expense of fuel efficiency – there is still wisdom in sticking to the long-term plan that fits your fleet and business goals.
Fuel is Not the Greatest Cost of Operating Your Fleet
It’s easy to see why fuel is often perceived as the greatest expense in managing a fleet; our industry spends a lot of time discussing how to manage consumption and maximize efficiency, especially when fuel prices are high.
Interestingly, the biggest cost in fleet management isn’t fuel costs, but rather the depreciation of the vehicles. Perhaps this isn’t that surprising, since we all know vehicles begin to depreciate in value as soon as they leave the dealership.
Insurance companies are onto the significance of depreciation too; you might have seen an increase in ad campaigns, promoting full replacement-value to attract new customers. Keeping in mind the biggest depreciation dip happens in the first 12 months, we always try to find out how new customers plan to use their vehicles – how frequently (annual mileage projection) and for what purpose – for both the short and long run.
Anticipating needs in advance is helpful so vehicles can be pre-ordered – with all the required specs – with the luxury of time. This knowledge also eliminates added expenses and unnecessary options. Retail vehicles usually have features that are not needed for fleet use and don’t return additional value when remarketed at lease end.
Getting the foundation right – that is, projecting the life cycle of the fleet – also helps us build the best leasing plan and put our customers in the right vehicles at the best price. When we do that part right, then managing fuel costs relative to the overall cost of running the fleet doesn’t have to be the primary concern.
Low Fuel Prices Aren’t Here to Stay
As much as we like to avoid thinking about it, highs and lows at the pump will usually level out. At some point, gas prices will likely begin to climb again. For this reason, it’s important to think longer term and avoid any drastic changes to your business plan.
Unless the cost of your product/service is tied directly to the cost of fuel (i.e. if you’re in the transport or delivery service where customers expect to pay less when fuel prices drop), we recommend banking the savings or using gains resulting from lower fuel costs for your fleet elsewhere in the business.