As your business grows, managing your fleet can become a struggle: You need a fleet that's big enough, reliable enough, and flexible enough to service your delivery footprint, but you also need to manage costs. Striking the right balance can be tricky--especially since many fleet-management costs are hidden. 

Kirk Morton, director of sales operations at Ryder, offers the following advice for businesses hoping to understand the costs hidden within fleet ownership: "The first step to quantifying your total cost of ownership (TCO) is identifying its fundamental components. An effective approach is to categorize your fleet TCO into three major asset components: acquisition, operations, and disposal." Let's take a look at each category.

Total Cost of Ownership (TCO)

Fleet Acquisition

These costs include initial expenditures, such as down payments, and ongoing costs, such as interest over time--which, when combined with depreciation, make a vehicle a problematic investment. But even buying vehicles outright with cash comes with cost multipliers, such as the loss of cash-on-hand that could otherwise be gaining interest or reinvested in your business. Buyers of much bigger fleets may have greater purchasing power that affords them more reasonable terms--but most gradually scaling businesses aren't able to negotiate from a position of strength.

Fleet Maintenance

Maintenance expenses cannot be ignored, as your delivery schedule can quickly become a nightmare with even one truck offline. Vehicles that are not properly maintained lead to a cascade of problems: missed shipments, angry customers, ruined perishable inventory, lost business, the need for replacement vehicles, and repairs that cost far more than preventive maintenance would have. Poor maintenance can also result in costly accidents, increased insurance premiums, legal liability, and unfavorable Compliance, Safety, Accountability (CSA) inspection results. And as a fleet ages and accrues wear and tear, it becomes harder to predict maintenance costs--especially without carefully executed preventive maintenance.

Fleet Disposal

Fleet disposal, the process of eliminating old trucks from your fleet, is an afterthought for many business owners--but it shouldn't be. Costs in this area are dependent on a difficult balance of sales gains and losses (and their potential tax liability) and the depreciation of a fleet. Vehicles depreciate an average of 20% the first year and 15% each year following, but wear and tear due to poor maintenance or other industry-specific factors can devalue a fleet more quickly.

Indirect Costs

The total cost of owning and managing a fleet is based on a series of changing and interdependent variables, making it difficult for business owners to get a complete picture that will allow them to predictably budget. Adding to the challenge is the fact that many of these costs are indirect. 

"It's easy to overlook the indirect costs associated with running a fleet," Morton notes, "meaning the people and systems that aren't directly related to fleet maintenance and management, but who are essential to their smooth operation."  

Examples of indirect costs include: 

  • Human Resources
  • Payroll
  • Accounting Systems
  • Insurance
  • Taxes
  • Training
  • Regulatory Compliance
  • Spec'ing New Trucks
  • Licensing
  • IT Personnel
  • Permitting Costs

These indirect costs can add up quickly. And, without personnel experienced in fleet logistics, many small and midsize businesses will have trouble keeping up with their larger competitors.

Ryder ChoiceLease as a Streamlining Solution

For businesses looking to control transportation costs and free themselves from the many burdens of managing a fleet, outsourcing can be a wise choice. As the first of its kind in the industry, Ryder's ChoiceLease provides businesses with the maximum amount of flexibility and choice. 

According to John Barlow, Ryder's vice president of global products, ChoiceLease is a true game-changer for small and midsize businesses. "Businesses no longer have just one option when considering full-service leasing--and this is a first in the transportation industry," he says. "You choose the lease with the maintenance level and the delivery method you prefer. You choose the type of truck you want. You decide the terms. And you choose from various financing options. The only commitments you make in this lease are the ones you want."

Beyond relieving themselves of managing TCO, Ryder's customers also receive the advantage of becoming part of a large-scale fleet operation. With the scale of Ryder's fleet and maintenance operation comes the ability to negotiate lower costs for parts, tools, and vehicles--savings that can be passed on to customers. Investing with Ryder saves you time, trouble, and money--and lets you focus on growing your business.

We hope you enjoyed this excerpt from our new guide, “Today’s Fleets: Turning Complexity into reliability and growth to meet business demands”.  To download the full guide from Ryder and Inc, click here.