Understanding your Total Cost of Ownership
When profit margins are squeezed, it may be easy to be persuaded away from fleet investment because an operator has concerns about investment. In other cases, businesses might be tempted away from known suppliers of replacement parts, oils, lubricants and tyres in favour of cheaper products.
But looking at individual items associated with vehicle fleets may be a false economy and may be damaging in the long run. Keeping hold of a commercial vehicle too long may end up costing the business more money than a new replacement. And, all too often saving money upfront on the associated components can see companies going back to their original supplier after a bad experience.
A more measured approach to looking at a business’ outgoings is to calculate the total cost of ownership – or TCO. Looking at the total cost of ownership is a way of assessing the long-term value of a purchase to a company’s bottom line.
A number of elements are included in the calculation, which is often represented by a pence/euro cents per mile/kilometre figure. For example, TCO includes the purchase price of a particular asset, plus the operating costs over that asset's lifespan. That means including capital, maintenance, asset depreciation, administration and driver costs, to work out a true figure of how much it costs to run a vehicle.
An accurate TCO calculation may help a company determine exactly when to replace vehicles or consider transitioning to leased or even rental vehicles. So, while spending on a new asset upfront might not appear to make sense, it could actually be beneficial to a business when analysing the TCO.
By spreading the costs out over a period of years, fleet managers may get a better handle of their specific fleet costs. What’s more, such is the format of the calculations, costs of individual items – such as insurance, fuel, tyres and consumables – may be negotiated downwards to save further costs in the future.
Whatever the size of the fleet, whether it’s long-haul trucks, last mile delivery vans or an urban commuter bus, the full range of Texaco Delo products may help to increase durability and maximise productiity in an ever-competitive world.
Find out more about Texaco Delo products for commercial vehicles here.
