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3 Keys to an Effective Fleet Vehicle Replacement Strategy

One of the universal truths of life is that nothing lasts forever. Our clothes, our household appliances, our electronics - eventually everything needs to be replaced. In some situations it is a case of planned obsolescence. We know that some goods are actually designed to either break or wear out as time goes on. Whether this is a way to keep consumers consuming or is an actual, valid method of ensuring that technology marches on; well, that depends on who you ask. But, the song is always the same: you buy something, it breaks or wears out, and you buy another one.

Few people know this pain like fleet managers. Whether you’re responsible for two vehicles or two hundred, you are constantly monitoring your fleet and the hundreds of parts that make up each vehicle. Most of the time, these worn out parts can be replaced. A good mechanic is worth his or her weight in gold when it comes to saving you money throughout the year and keep your fleet running. But, eventually, something happens and it’s time to consider whether the vehicle should be repaired or if it’s time to replace it.

Most fleets will use one of three standards when determining whether to replace a vehicle or continue to repair it.

1. Lifecycle analysis. Numbers don’t lie and somewhere in all of those reports and numbers, there exists a sweet spot. There is a point in time when you’ve gotten everything you can out of the vehicle and it has given you the most it can give you for the absolutely lowest investment from you on the financial side. Fleets that use this kind of analysis will replace a vehicle once it has reached that point, regardless of its overall condition. The vehicle could limp over the finish line or it could power across it just as powerful as the day it was purchased. Regardless, the vehicle is going to be retired and replaced.

2. Cost ceiling. Based on financial analysis, a ceiling is set per vehicle that states how much the company is willing to spend to keep it running over its lifetime. Once that number is reached, the vehicle is replaced. This can be beneficial if your company is working with used vehicles where other strategies over the vehicle’s lifetime may not be as accurate. In this case, rather than running mileage assessments or looking at an overall vehicle lifecycle, the company is saying that they acknowledge that the vehicle is used and they are willing to invest X dollars to try to get more life out of that vehicle. Proper tracking is, of course, essential when using a cost ceiling as a primary fleet vehicle replacement strategy.

3. Age or mileage ceiling. Much like the lifecycle analysis, the age or mileage ceiling sets a hard limit on a particular aspect of the vehicle. Once that limit is reached, the vehicle is retired. Obviously, this strategy can be effective when working with new vehicles. Just as a company’s technology can be put on a 3, 4, or 5 year lifecycle, a fleet can be treated the same way.

The same limits can be set for mileage. Based on economic conditions, road conditions, type of travel, and other factors, a mileage limit can be set per vehicle and the vehicle can then be retired once that limit is reached.

Like most things, each strategy will have its strengths and weaknesses. The key is to find the strategy that works for you, your fleet, and your company. As always, the power of an excellent fleet management software solution will be instrumental in helping you reach a decision.

If there is any way that we can help with your fleet management needs, or you’d like to discuss how to integrate fleet management software into your fleet replacement strategy, feel free to contact us by email or through skype (our skype id is vinitysoft).