Extended Service Life Exerts Upward Pressures on Fleet
Market Trends • January 15, 2004
A key factor exerting upward pressure on public sector fleet operating costs is the long-standing trend to operate vehicles for ever-longer service lives. All around the country, public sector fleets are being forced by budgetary constraints to defer or reduce capital expenditures to acquire replacement vehicles. This is especially the case for fleets that depend on appropriations from their agencies' general funds rather than fleet replacement funds. As a result, these fleets are running vehicles longer and at higher mileages. This trend promises to continue into the future.
Extending vehicle service lives has a cumulative impact on fleet operating expense and total lifecycle costs. Higher miles and more engine hours result in across-the-board maintenance cost increases, the need for additional sets of replacement tires, and the greater possibility of a catastrophic failure. A recent survey of 515,000 fleet vehicles by Automotive Fleet, our sister magazine, revealed that the majority of operating expenses occur in the 48,000-80,000-mile range. In fact, if you further breakdown this mileage segment, almost 35 percent of a vehicle's lifetime operating cost occurs in the 68,000-80,000-mile range. It is worth noting that the 68,000-80,000 mile-range is 15 percent of a vehicle's life (if the vehicle life is 80,000 miles). Consequently, 35 percent of a vehicle's lifecycle cost occurs in the last 15 percent of life. This argues for short lifecycles-funding permitted. It is also important to note that this study only analyzed operating expenses up to 80,000 miles. In all probability, the percentage of total lifetime costs would be even higher if the study included vehicles beyond the 100,000-mile range.
OEM Actions Increase Costs
The trend to higher operating costs is also compounded by actions that OEMs have taken in the design and assembly of some vehicles. Over the past five years, a trend among auto manufacturers has been to combine different vehicle components into single modules. For example, a ball joint assembly, in some models, is no longer a serviceable item. Manufacturers now combine the ball joint assembly with the control arm into a single module. If a ball joint needs to be replaced, the control arm assembly now must also be replaced. Likewise, the fuel pump and the sending unit for the fuel gauge are now built as a single unit in some models. In order to service a fuel gauge, you also have to replace the fuel pump and vice versa.
Similarly, tire expenses have been creeping upward for fleets. One reason for the increased cost is the size and type of tires that auto manufacturers specify for certain vehicles. A growing number of cars are equipped with larger diameter rims and lower profile tires. The same is true for light-duty trucks, which for a long time, have been migrating from 15-inch to 16-inch wheel diameters as standard equipment. The net result of all these actions is more expensive replacement tires.
In fairness, other actions by OEMs have helped to mitigate operating expenses. Onboard engine electronics help vehicles get better fuel economy and facilitate more efficient engine operations. Manufacturers have extended service intervals with longer lasting spark plugs and extended-life fluids. In addition, the reduced cost and availability of diagnostic equipment is helping to control maintenance costs by increasing the instances of first-repair resolution, which results in the use of fewer unnecessary parts. The philosophy that if you threw enough parts at a difficult problem, you would fix a vehicle is becoming a thing of the past.
Nonetheless, there are "institutional and structural" issues that are increasing operating costs. The cost-effectiveness of extended service life should be reviewed and modified to offset the increase in operating costs being driven by OEM design changes.
Let me know what you think.
Originally posted on Automotive Fleet