Every successful car fleet management program is built on controlling and reducing the costs associated with keeping fleet vehicles on the road.
If fleet owners and operators fail to address spending in a variety of categories, expenses can start to spiral out of control and affect the bottom line for the worse.
In this article, we discuss some of the most important factors that influence car fleet management as well as two calculations that provide insight into how well the business is running.
Table Of Contents
- What Is Car Fleet Management?
- Factors To Consider In Car Fleet Management
- How To Calculate The Cost Of Ownership
What Is Car Fleet Management?
Car fleet management is the organization and execution of all tasks and processes involved in running a business’s fleet, typically with the goal of keeping those vehicles operating efficiently, on time, and within (or under) budget.
Fleet activities are a major cost center for most businesses. How a business manages those activities can have a direct and profound impact on overall profitability.
Successful fleets use a series of essential tools to help control (and reduce) costs. These tools include:
- Fleet management software
- Telematics
- Fuel card and expense management software
- GPS tracking and navigation
- Vehicle diagnostic and maintenance software
- Driver monitoring systems
- Electronic Logging Devices (ELDs)
The first three are by far the most important. Of those three, the fuel card — and its associated expense management software — is the easiest and most efficient way to begin controlling some of the largest costs associated with any car fleet management program.
Factors To Consider In Car Fleet Management
1) Technology
As we mentioned above, technology plays a pivotal role in car fleet management.
Implementing the big three tech tools — fleet management software, telematics, and a fuel card (with expense management platform) — can have a profound effect on every aspect of business activities.
Fleet management software can help owners and operators keep everything organized and moving in the right direction.
Telematics can help owners monitor the condition of each vehicle and build preventative maintenance schedules to reduce the potential for a catastrophic breakdown.
Advanced fuel cards with online tools allow managers to set spending limits, control driver purchases, prevent theft, cut spending, and comply with all International Fuel Tax Association regulations.
This essential technology gives managers more control over fleet activities in order to bring the major cost centers under control.
2) Vehicle Size
Vehicle size, in tandem with comprehensive fuel expense controls, can go a long way toward reducing the total cost of keeping a fleet running smoothly.
Does the fleet need full-size sedans? Or can it step down to smaller, more fuel-efficient vehicles and still get the job done? (This applies to work trucks, semi trucks, and vans as well.)
Managers should talk to the drivers who operate these vehicles every day to get their thoughts on the matter, and then analyze fuel-use data and expenses to see what might work best for the business.
Optimizing fleet vehicle size in this way can go a long way toward improving operations overall and helping owners and operators create an effective car fleet management program.
3) Fleet Size
Fleet size is another factor to consider when thinking about how to improve car fleet management.
Administrators should strive to field only the necessary vehicles so that their business isn’t spending more on fuel, licensing and registration, maintenance, and manpower than it has to.
Analyzing data provided by fleet management software, telematics, and fuel card software can help owners and operators get a clear picture of how a business is using fleet vehicles and whether or not it can get by with fewer (or smaller) options.
4) Buying Vs. Leasing
Buying — or purchasing fleet vehicles outright — is a major up-front expense that comes with a variety of variables that a business may not be ready to handle (e.g., maintenance, repairs, taxes, etc.).
Leasing, on the other hand, allows businesses to pay for the use of fleet vehicles over several years rather than all at once.
A thorough analysis of the business’s ongoing expenses, income, and fleet strategy can help managers decide whether buying or leasing is the right option.
5) Miles Traveled
Miles traveled can have a substantial effect on the efficiency, productivity, and longevity of all fleet vehicles within a car fleet management program.
Some businesses have found success by:
- Sending their most fuel-efficient vehicles on the longest journeys
- Planning the shortest routes
- Grouping nearby stops together
- Preventing extra driving
- Providing an open-loop fuel card so drivers don’t have to go out of their way to fill up
An analysis of the data provided by fleet management software tools — particularly fuel card software — can help managers find ways to reduce miles traveled and cut expenses in the process.
6) Fuel
Fuel is a significant — if not the largest — cost for most fleet-based businesses.
Fleet managers can’t control the cost of gas and diesel, but there are many things they can do to control how much fuel a fleet uses and how much a business pays for that necessary resource, including:
- Analyzing fuel efficiency before buying new vehicles
- Emphasizing good driving habits
- Reducing unnecessary idling
- Using a fleet fuel card and expense management software
This last solution is particularly effective if the card is open-loop and allows drivers to fill up at the stations along their route that have the best prices.
7) Driver Expenses
In addition to fuel, fleet drivers may need to spend company funds on other things while on the road, including:
- Repairs
- Supplies
- Food
- Lodging
If not monitored closely, these expenses can have a significant impact on a business’s bottom line.
The best way to supervise and control these extra costs is with an all-in-one fleet fuel and expense card solution that gives managers the ability to set the spending rules for each card, driver, or vehicle.
How To Calculate The Cost Of Ownership
Total Cost Of Ownership
All of the factors mentioned above contribute in some way to the Total Cost of Ownership (TCO) for a car fleet management program.
Calculating these numbers can provide managers with two distinct data points:
- Total Cost of Ownership for an individual vehicle
- Total Cost of Ownership for the entire fleet
The process starts by figuring the TCO for each vehicle on the road for a specific time period (e.g., a month, three months, six months, or a year) using the following formula:
Total Cost of Ownership (for a single vehicle) = Fixed Vehicle Costs + Variable Vehicle Costs
Then, with the TCO for each vehicle in hand, fleet managers or admin can add up all of those numbers to find the TCO for the entire fleet using the following formula:
Total Cost of Ownership (for the fleet) = TCO Vehicle 1 + TCO Vehicle 2 + TCO Vehicle 3 + …
Armed with the results of these calculations, fleet managers will be better positioned to change both fixed and variable costs in order to reduce the TCO for each vehicle and the fleet as a whole.
Vehicle Cost Per Mile
Another important fleet variable that managers should monitor is Vehicle Cost per Mile (VCM)
Vehicle Cost per Mile is based on Total Cost of Ownership, so it’s important to run that calculation first. The formula for Vehicle Cost per Mile is:
Vehicle Cost per Mile (for a single vehicle) = Total Cost of Ownership / Total Miles Driven
As with the TCO calculation, managers can use the Vehicle Cost Per Mile numbers for each individual vehicle to figure out the total and average VCM for the entire fleet.
To do that, those running the calculations add up all the individual VCMs (the total for the fleet) and then divide by the total number of vehicles in use (the average for the fleet).
So, for example, if a fleet consists of three vehicles with VCMs of $1.00, $0.75, and $1.15, the first part of the calculation would look like this:
Fleet Vehicle Cost per Mile = $1.00 + $0.75 + $1.15
Fleet Vehicle Cost per Mile = $2.90
That’s the total Vehicle Cost per Mile for all the vehicles on the road.
The average VCM for the fleet can be calculated by dividing that number by the total number of vehicles — in this case, three.
Average Vehicle Cost per Mile = $2.90 / 3
Average Vehicle Cost per Mile = $0.97
With both the TCO and the various VCM numbers in hand, administrators will have a benchmark against which to measure any steps they take to reduce costs, implement essential tools, and improve driver behavior on the road.
Streamlining Car Fleet Management With Coast
As we’ve discussed, car fleet management is best administered through a combination of essential tools, including fleet management software, telematics, and an expense management program (i.e., a fuel card and its associated software).
Of those three tools, the Coast fleet fuel card is the easiest and most effective solution to implement.
With the Coast card and its powerful online platform, fleet businesses of all types and sizes will be better positioned to monitor and control fuel costs, reduce miles traveled (through open-loop capability), and keep track of driver expenses while vehicles are away from home base.
Learn more about Coast and get started with a simple application process.
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