THE FLEET INDUSTRY
These days it seems that everything is on the rise — inflation, interest rates, and the cost of living and business, to name a few. The latest report from the Bureau of Labor Statistics shows that the annual inflation rate is the highest it’s been since 1981 at 8.6% in May.
The vehicle industry has been no exception. According to the U.S. Department of Labor, the motor vehicle maintenance and repair index increased 2% in June, the largest increase since 1974. The department also found the cost for motor vehicle parts and equipment increased 14.9% over the last year.
We all know that when maintaining and operating a fleet, the costs you see are much higher than the average Joe, who according to KBB, drives an average of 12,724 miles a year. The average mileage for fleet is around 22,758 miles a year, based on the National Transportation Energy Data Book, which was determined by looking at the average annual miles covered by commercial vehicles in the compact car, intermediate car, pickup truck, minivan, SUV, and full-sized van categories.
In a previous blog, we dove into the challenges of deciding whether it’s better to buy new, used, or not at all in today’s market, which you can read here. In the current economy, it can be a gamble when deciding how to manage a fleet effectively and efficiently. With higher interest rates and inflated prices, buying new may not be as appealing. But by not replacing vehicles because of higher interest rates and prices, you could end up paying a lot more for maintenance in the long run with the rising costs of parts and labor.
Fleet managers have a lot to consider when determining a vehicle’s optimal cycling point. Some may replace vehicles at established intervals based on age and mileage. Others may replace vehicles when the cost to repair exceeds the vehicle’s value. There are fleet managers who try to determine the optimum replacement point that will cost them the least overall during the vehicle’s life. For example, a company may cycle out vehicles that were purchased new after the warranty expires so they don’t have to deal with maintenance costs or downtime associated with unexpected and unplanned repairs.
Given the increased repair and maintenance costs, it’s also important for fleet managers to consider how they service their fleets and the various options available to them. Whether you work with a dealership, automotive shop, or manage internally, your bottom line will be impacted differently by the rise in costs depending on who is managing your fleet repairs and maintenance.
One of the few benefits to managing a fleet right now in the current market is resale values. Vehicles are maintaining their value better now than ever before, which means it’s also more important than ever to stay up on routine fleet maintenance, despite rising costs. Keeping your vehicles well maintained gives you many benefits like lower repair costs, but the real benefit comes when it’s time to sell. Being able to show a good history of maintenance will help even more to maintain your vehicle’s value.
When it comes to upgrading and maintaining your fleet of vehicles, it’s important to work with people who understand your business and industry. At United Leasing & Finance, we’ve worked in the fleet and transportation industry since 1964 and have a team of dedicated fleet experts who understand the current market and its challenges. Whether it’s finding great deals on new fleet vehicles, getting the best price for your used vehicles, or handling your fleet maintenance schedules, we’re here to make managing your fleet easier than ever — even in the complicated landscape we’re facing today.
United Leasing & Finance is a customer-focused and growth-oriented leasing and finance company committed to providing custom financing solutions to businesses across the U.S. and Canada. For almost 60 years, they have partnered with clients to achieve mutual success from small businesses to Fortune 100 companies and has been financing in the fleet space from the beginning. United is also a proud member of the NAFA Fleet Management Association and the International Franchise Association (IFA).