Annual total cost of ownership index shows a likely increase is coming
SPARKS, Md.—Each year, Element Fleet Management releases its Total Cost of Ownership (TCO) Index, a study that looks at major cost categories affecting vehicle fleets. The index is designed to help fleet managers and businesses understand fleet and vehicle expenses in the context of a changing economic landscape.
The TCO Index found that 2016 was a good year for fuel cost savings, with a 12-percent reduction in spend, driven by lower prices than in 2015. In addition, those savings enabled businesses to offset a seven percent increase in net depreciation, almost entirely due to a softening resale market for vehicles other than pickups and cargo vans. In contrast, last year’s TCO Index only reported a one percent rise in depreciation costs.
But these fuel savings may be short-lived.
While average US fuel costs fell 12 percent year-over-year, projected per gallon fuel costs for 2017 is estimated at $2.38, an 11 percent increase. This means that businesses will no longer be able to absorb other costs of vehicle ownership with fuel savings, resulting in a higher annual TCO.
“For companies hoping to save at the pump in 2017, it’s not great news,” said Chad Christensen, senior strategic consultant, Element Fleet Management. “However, there are other opportunities to decrease TCO, including choosing your new vehicles wisely. For example, fleet managers looking to replace cargo vehicles should consider the new Euro-style cargo vans. They’re more fuel efficient, and there’s a strong demand for used, older-style vans among trade contractors, making this a good time to sell your old vans.”
Other recommendations for fleet managers and businesses for the remainder of this year include the following: