Operations

Solving the Mystery of Rising Fleet Costs

Posted on June 1, 2000 by LCT Staff - Also by this author

It can be a puzzle that demands the skills of someone as clever as Columbo. Ever feel like your fleet costs have a life of their own, soaring to inexplicable heights while you’re left scratching your head? Before you can even hope to control your expenditures, you must first track and analyze them. This requires good detective work, holding a magnifying glass up to the different categories of expenses your company incurs during the life cycle of a limousine. Some careful sleuthing can produce the clues you need to identify—and ultimately handcuff—those operational villains that can throw your profit margins out of whack.

During this year’s LCT Show, a session titled, “Quality Choices for Fleet Management” offered limousine operators options on how to control and track vehicle expenses. One tool is to use life-cycle cost analysis to determine which kinds of vehicles are the best fit for your company and how often you should replace them. A thorough investigation of your company’s fleet expense categories can also arm you with the data you need to set up a fleet management system that can collar unwarranted spending.

Session speaker Mike Antich, executive editor and associate publisher of Automotive Fleet magazine (an LCT sister publication) says limousine operators can forecast fleet expenses using a five-step “life-cycle costing” technique. Beforehand, however, they need to understand the differences among the three categories of fleet expenses: standing expenses, operating expenses and incidental expenses.

A limousine company incurs standing expenses whether or not the car is used. They include such fixed costs as depreciation, insurance, and license and registration fees. Depreciation is the difference between the purchase price and the net resale value of a vehicle. Operating expenses include the cost of gasoline, oil, tires and maintenance. These expenses are also known as running or variable expenses. Incidental expenses include the cost of parking, storage, washing and tolls. The life cycle cost refers to the overall expense of owning or leasing a vehicle. This includes all operating expenses from the time

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