Executive Briefings

Drop in Fuel Prices Causes Fleet Vehicle Costs to Decline 14 Percent in 2015

The total cost of having a vehicle fleet fell by 14 percent from 2014 to 2015 due primarily lower fuel prices, according to the inaugural Element Fleet Total Cost of Ownership Index.

Drop in Fuel Prices Causes Fleet Vehicle Costs to Decline 14 Percent in 2015

Other factors that make up the TCO Index include vehicle depreciation, maintenance and interest expense. Overall, companies with fleets experienced their lowest expenses in at least five years, according to Element Financial Corp., the fleet management and equipment finance company that owns the index.

“[This] suggests that now may be a good time to replace vans and pickups while the resale market is still strong for those types of vehicles,” said Bob Sandler, senior vice president of Strategic Consulting for Element Fleet Management. “Lower gas prices provide an opportunity for fleets – or individuals – to make replacement investments, increasing safety and fuel efficiency without a major year-over-year spike in expenses.”

Other factors noted include:
 
• Average U.S. fuel costs fell 29 percent, driven by the price of fuel ($2.43 per gallon in 2015 vs. $3.36 the previous year) and improvements in vehicle miles per gallon.

• Depreciation costs rose 1 percent, attributed to a higher average initial cost of vehicles, and offset by continued strength in the resale market for vans and pickups.
 
• A 1 percent rise in average monthly maintenance costs, driven by an increase in unscheduled repairs (1 percent) and an increase in preventative maintenance expenses (4 percent). Tire costs remained static year over year.

Element expects the index to be useful for financial professionals who evaluate risk related to uncontrollable market forces such as fuel and tire prices, interest rates or fluctuations in the used vehicle market.

Source: Element Financial Corp.

Other factors that make up the TCO Index include vehicle depreciation, maintenance and interest expense. Overall, companies with fleets experienced their lowest expenses in at least five years, according to Element Financial Corp., the fleet management and equipment finance company that owns the index.

“[This] suggests that now may be a good time to replace vans and pickups while the resale market is still strong for those types of vehicles,” said Bob Sandler, senior vice president of Strategic Consulting for Element Fleet Management. “Lower gas prices provide an opportunity for fleets – or individuals – to make replacement investments, increasing safety and fuel efficiency without a major year-over-year spike in expenses.”

Other factors noted include:
 
• Average U.S. fuel costs fell 29 percent, driven by the price of fuel ($2.43 per gallon in 2015 vs. $3.36 the previous year) and improvements in vehicle miles per gallon.

• Depreciation costs rose 1 percent, attributed to a higher average initial cost of vehicles, and offset by continued strength in the resale market for vans and pickups.
 
• A 1 percent rise in average monthly maintenance costs, driven by an increase in unscheduled repairs (1 percent) and an increase in preventative maintenance expenses (4 percent). Tire costs remained static year over year.

Element expects the index to be useful for financial professionals who evaluate risk related to uncontrollable market forces such as fuel and tire prices, interest rates or fluctuations in the used vehicle market.

Source: Element Financial Corp.

Drop in Fuel Prices Causes Fleet Vehicle Costs to Decline 14 Percent in 2015