Learning Zone

Reduce Overall Fleet Running Costs Through Flexible Vehicle Replacement Policies

By Ellen Sowerby
25 January 2021

With most replacement strategies set at fixed intervals, we ask if this really the best approach.

With more data, online reporting and digital costing and procurement now available on the market you might find it is time to consider a more flexible replacement cycle strategy.

Using technology, you can focus on the best performing and lower cost makes and models for your operations, and be far more granular in your approach to vehicle provision. This will allow you to make tactical decisions for each vehicle rather than have ‘one-size-fits-all’ strategies that are blunt and possibly financially and operationally inefficient.

When it comes to vehicle replacement strategies, most fleets have fixed cycles driven by a variety of factors – such as operating and maintenance costs, lease contract or financing terms, or tax advantages related to new equipment.

But is this really the best approach for a modern, agile business?

This type of more flexible vehicle replacement outlook could involve mixing different strategies for different functions, shortening or lengthening cycles as needed or even making use of short-term programs.

Here are some of the top things to consider, when it comes to pinpointing the best vehicle replacement cycle for your fleet:

What are your real-world needs?

Working out the most effective replacement cycles for your vehicles isn’t always easy. It could be that mileages vary greatly across different parts of your operation. The key is to interrogate your data, considering each need separately to assess whether a change in replacement cycles could lead to long-term savings.

Can you take advantage of the market?

Frequently, you may find there are short-term financial incentives that are very attractive and actually make sound economic sense. For example, manufacturers sometimes offer aggressive incentives for specific models or subsidise leases that have a lower monthly cost. If you are in a position to take advantage of these savings, it might work well for your operation.

Is it worth lengthening cycles in times of uncertainty?

Economic uncertainty often causes fleets to extend vehicle lifecycles by opting for longer lease terms or delaying purchases. Whilst extending lifecycles puts off the need to make a decision until you have a better idea as to what is happening to your business and the economy, this kind of thinking can create problems.

For instance, older equipment might lead to higher maintenance costs and repair bills, including items that are no longer covered by a manufacturer’s warranty.


Are any suitable short- or medium-term solutions available?

If you identify a requirement for a vehicle that will need to last only a year or two, many leasing companies offer short- and medium-term contracts for new vehicles, some of which are renewable at six- or 12-month intervals. These programs provide a degree of flexibility without entering into a longer-term commitment.


Would reallocation work?

If some of your vehicles have less mileage than others, a strategy may be to swap around equipment. This technique can help:

  • Balance utilisation across your fleet
  • Avoid leased vehicles being turned in with higher mileage than their contract allows
  • Reduce the costs that come with operating older equipment


How can you make an informed decision?

Whatever path you take for vehicle replacement, you need to crunch the numbers to better understand how your fleet is being used, and identify opportunities.

Take steps to gather useful fleet information and conduct a thorough assessment of vehicle replacement cycles to identify which equipment is more/less efficient and costly to operate.

Fleet management software can help you consider all of these factors. You can use it to create reports to compare the cost of extending lifecycles to replacing equipment. This data can also help create different scenarios so you can evaluate ways to optimize the use of your current fleet.

Having looked at all of the factors in detail, it could be that a standard replacement cycle is the best option for your operation. However, it is worth every effort to understand if other choices may also work well for your fleet – to help you make the most informed decision possible.

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